Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

PRIVATE Bills [Lords] (Standing Orders not previously inquired into complied with),

Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, That, in the case of the following Bills, originating in the Lords, and referred on the First Reading thereof, the Standing Orders not previously inquired into, which are applicable thereto, have been complied with, namely:

Bognor Gas and Electricity Bill [Lords].

Commercial Gas Bill [Lords].

Hastings Tramways Company (Trolley Vehicles) Bill [Lords].

Bills to be read a Second time.

OUSE DRAINAGE BILL,

Mr. SPEAKER laid upon the Table Report from one of the Examiners of Petitions for Private Bills, pursuant to the Order of the House of the 1st day of April, That, in the case of the following Bill, the Standing Order, which are applicable thereto, have been complied with, namely:

Ouse Drainage Bill.

Frimley and Farnborough District Water Bill,

As amended, considered; to be read the Third time.

London, Midland and Scottish Railway Bill,

As amended, to be considered Tomorrow.

Oral Answers to Questions — TRADE AND COMMERCE.

FRANCE (CUSTOMS DUTIES).

Sir JOHN POWER: 2.
asked the President of the Board of Trade whether, under the proposed new French tariff, British goods will be liable to the general tariff or to the minimum tariff; and if he can state under what conditions these two tariffs apply respectively?

The PRESIDENT of the BOARD of TRADE (Sir Philip Cunliffe-Lister): British goods are dutiable on importation into France at the lowest rates applicable to any foreign goods, by virtue of a, French law of 1882, which I have no reason to suppose there is any intention of modifying. The conditions governing the application of the general minimum and intermediate tariffs in France are set out in Articles 14–19 of the Decree of 28th December last codifying the Customs law, of which I am sending my hon. Friend a copy.

EXPORT OF CAPITAL.

Mr. TAYLOR: 6.
asked the President of the Board of Trade whether he proposes to seek any powers to regulate the export of capital from Great Britain, to ensure that British citizens shall not be permitted to damage British trade by financing competitive industries in other countries?

The FINANCIAL SECRETARY to the TREASURY (Mr. Ronald McNeill): I would refer the hon. Member to the answer which I gave on the 15th March to the hon. Member for the Stourbridge Division.

Mr. TAYLOR: May we take it that the Government have no intention of examining this very important matter, in view of the damage done to the workers and traders in Great Britain by the export of capital to other countries? Are not the Government considering the matter?

Mr. McNEILL: I think the Government are fully aware of all the circumstances in connection with it, and whatever significance they may have.

Mr. TAYLOR: I asked whether the Government are taking any steps in this matter. Am I to take it that the position remains substantially the same as the answer indicates?

Mr. McNEILL: I do not think the Government are taking any steps in the matter in the sense of making any alteration in the law.

RAW FRUIT (IMPORTS).

Sir J. POWER: 7.
asked the President of the Board of Trade the value of fresh fruit imported from Empire countries and foreign countries, respectively, during the year 1926?

Sir P. CUNLIFFE-LISTER: The value of raw fruit (other than nuts used as fruit) imported into the United Kingdom in 1926, and consigned from British countries, was £8,308,000, and of that consigned from foreign countries £22,862,000.

ITALY (FREE PORT AREAS).

Mr. W. THORNE: 10.
asked the President of the Board of Trade whether at the end of this year the following ports in Italy will be free from import duties: Savona, Genoa, Leghorn, Naples, Brindisi, Bari, Ancona, Venice, Trieste, Fiume, Palermo, Messina, Catania and Cagliari?

Sir P. CUNLIFFE-LISTER: I have seen a newspaper report of the decision of the Italian Government to establish free port areas in a number of Italian ports. I have no official information on the subject, but I will have inquiry made.

INDIA (BRITISH IMPORTS).

Mr. PILCHER: 12.
asked the President of the Board of Trade the percentage of Indian imports derived from the United Kingdom in the years 1923, 1924, 1925 and 1926?

Sir P. CUNLIFFE-LISTER: The percentage of the total imports of merchandise (by sea) into India which was recorded as consigned from the United Kingdom in the years specified was as follows: 1923, 57.7; 1924, 54.4; 1925, 52.3; 1926, 49.4.
These figures are exclusive of Government stores, of which particulars are not available by countries for calendar years.

Oral Answers to Questions — MERCANTILE MARINE.

COAST-WATCHING, CORNWALL.

Mr. ALFRED WILLIAMS: 3.
asked the President of the Board of Trade whether
his attention has been called to the wrecks which have occurred recently on the north coast of Cornwall; and whether, in view of the jury's rider at the inquest held upon a body washed ashore from the wreck of the steam trawler "Miura," he will consider improving the coast-watching arrangements in the Morwenstowe area?

Sir P. CUNLIFFE-LISTER: My attention has been called to two wrecks in this area. In the case of the "Miura," I am informed that watch was being maintained by the coastguard from a point about 4 miles distant from the place where the vessel was wrecked, and that had visual signals of distress been made, there is no doubt that these would have been observed and arrangements at once made for affording assistance to the ship. It is, as my hon. Friend will agree, not possible to arrange for the coast to be watched except at selected points, and I doubt whether there is a case for increasing the watch maintained over that part of the coast at which this vessel was wrecked. The loss of lives clearly indicates, however, the necessity for the provision of proper means of making distress signals at night on sea-going cargo and fishing vessels, and within the past few months the Board have circulated to shipowners and masters a notice calling attention to this, and urging the provision of suitable pyrotechnic signals which can be used without delay, and are obtainable at a low cost.

OIL DISCHARGE IN NAVIGABLE WATERS.

Lieut.-Commander KENWORTHY: 4.
asked the President of the Board of Trade whether any further steps have been taken, or are in contemplation, for the prevention of the discharge of fuel-oil from steamships near our coasts; if he is aware of the urgency of this matter as affecting fish life and the amenities of the coast; and whether agreement has been reached as to international action being taken to deal with this evil?

Sir P. CUNLIFFE-LISTER: As stated in reply to previous questions, the Government have accepted in principle the recommendations of the International Conference on Oil Pollution held at Washington last year, and the United States Government have been informed
to this effect. When a sufficient number of States have accepted these recommendations, it is anticipated that they will be embodied in an International Agreement, which will then be put into force by legislation in each of the Maritime States concerned. Shipowners of this country voluntarily adopted the recommendations of the Conference in December last, and gave the necessary instructions to the masters of their ships. I understand that similar action has been taken in the United States and in Holland. I am arranging for a return to be obtained and the results published as a White Paper, supplementing that issued in June, 1925. I hope to issue this shortly, and I understand that the information so far collected tends to show that the position on our coasts has much improved since 1924.

Lieut.-Commander KENWORTHY: Can the right hon. Gentleman say how many States have ratified, and does he anticipate that all the States will ratify at any early date?

Sir P. CUNLIFFE-LISTER: It is not merely a question of ratification. I hope it may be possible to get the Convention drafted and agreed to without further diplomatic meetings. That will save time. India and the United States have been informed that we should agree to the proposal. In anticipation of international action, this country, Holland and the United States have already taken action and are carrying it out.

BRITISH, LASCAR AND FOREIGN SEAMEN.

Lieut.-Commander WILLIAMS: 6.
asked the President of the Board of Trade the number of British, lascar, and foreign seamen employed in British ships in the years 1905 and 1915, respectively?

Sir P. CUNLIFFE-LISTER: If my hon. Friend will permit me, I will have the figures circulated in the OFFICIAL REPORT.

Following are the figures:

The first crews of all British vessels on the register at ports of the United Kingdom (including the Isle of Man and Channel Islands) on 31st December, 1905 and 1914, which were employed in sea trading at some time during the years 1905 and 1914, respectively, were made up as follow:


Year.
British (other than Lascars).
Foreign (other than Lascars)
Lascars.
Total.


1905
…
150,681
36,982
41,342
229,005


1914
…
172,143
27,555
49,820
249,518


Similar particulars were not compiled for the year 1915.

Oral Answers to Questions — COAL MINING INDUSTRY.

EXPORTS.

Mr. R. RICHARDSON: 11.
asked the President of the Board of Trade what tonnage of coal was exported from this country in the months of January, February and March, 1927, and the corresponding months of the years 1914, 1924, and 1925, together with the values of such exports?

Sir P. CUNLIFFE-LISTER: I am circulating in the OFFICIAL REPORT a table giving the particulars for which the hon. Member asks.

Following are the particulars:

The total quantities and Declared Values of Coal produced in the United Kingdom and exported in each of the months specified, excluding Coal shipped for use in steamers engaged in the foreign trade and in fishing vessels, were as follow:


Year.
January.
February.
March.





Quantities.





Thousand Tons.
Thousand Tons.
Thousand Tons.


1914
…
…
5,795
5,726
5,910


1924
…
…
5,441
5,075
5,190


1925
…
…
4,366
4,344
4,392


1927
…
…
4,093
4,173
4,820





Declared Values.





Thousand
Thousand
Thousand





£
£
£


1914
…
…
4,040
3,979
4,018


1924
…
…
6,679
6,201
6,391


1925
…
…
4,709
4,538
4,557


1927
…
…
4,291
3,983
4,460

The figures for 1914 exclude shipments to southern Ireland which are included in the figures for the later years.

RETAIL PRICES.

Mr. R. RICHARDSON: 36.
asked the Secretary for Mines whether he will cause an investigation to be made into the retail prices of coal, with a view to the publication of the full facts?

The SECRETARY for MINES (Colonel Lane Fox): I would refer the hon. Member to the Debate on this subject on Wednesday evening last. There have been three or four reductions in retail coal prices during the last two months, and prices are now approximately at the level of a year ago. I do not think that any further investigation is called for.

Mr. RICHARDSON: Is the right hon. Gentleman aware that miners' wages depend on the prices of coal, and we want to know the difference there is between pithead prices and the prices the consumer has to pay?

Mr. A. V. ALEXANDER: Can the Secretary for Mines say whether the choke in railway transport has now been completely removed, as it was holding up both supplies and prices, and also work for the miners?

Colonel LANE FOX: That has been considerably improved, but it has not been entirely removed.

Mr. LAWSON: Is the right hon. Gentleman satisfied with the retail prices of coal?

Colonel LANE FOX: I am never satisfied with anything.

Sir ROBERT HUTCHISON: 38.
asked the Secretary for Mines the price at pithead of coal exported from the British Isles during the years 1925, 1926 and 1927, and the price of imported coal from countries outside the British Isles at the destination port in the British Isles during the years 1926 and 1927?

Colonel LANE FOX: I regret that exact figures of the pithead price of coal exported are not in the possession of my Department, but the average declared value per ton f.o.b. of all coal exported from Great Britain and Northern Ireland was 19s. 10d. for 1925, 18s. 6d. for 1926, and 19s. 6d. for the first three months of 1927. The average declared value per ton c.i.f. of all coal imported was 42s. 11d. for 1926 and 55s. 3d. for the first three months of 1927.

Mr. W. THORNE: 62.
asked the Secretary for Mines if he is aware that the various qualities of coal have been reduced by 5s. per ton at the pithead, and that since the reduction the coal merchants in London have only reduced the selling price by 2d. per cwt., i.e., 3s. 4d. per ton; that the profit of the coal merchants is now 14s. 2d. per ton, an increase of 1s. 8d. per ton; and if he intends to take any action in the matter?

Colonel LANE FOX: I am informed that the pithead price of coal sold in cwts. in London from trolleys was recently reduced by about 4s. per ton, and that concurrently the selling price of this coal was reduced by from 2d. to 3d. per cwt. I am not aware that the profit of the coal merchants is now 14s. 2d. per ton. In view of the steady reductions in coal prices, I do not think that any action on my part is desirable or necessary.

Mr. THORNE: Can the right hon. Gentleman state who it is that regulates the selling price of coal in London?

Colonel LANE FOX: It is very largely a case of supply and demand. [HON. MEMBERS: "No!"] Very largely it must be influenced by supply and demand. I do not know how the hon. Member arrived at the figure of 14s. 2d. If he will talk with me about it, I shall be pleased to see him.

Mr. THORNE: The selling price in my own neighbourhood is 2s. 8d. per cwt. Is it not a fact that there are certain large coal factors, such as Cory and Sons, who regulate the price once every week in London?

Colonel LANE FOX: All merchanting is done to a certain extent by big firms fixing prices. If the hon. Gentleman will put these figures to me, I shall be glad to consider them with him.

Mr. THORNE: If the right hon. Gentleman goes outside he can see with his own eyes what is the price of coal.

Sir ROBERT THOMAS: Is it not well known that there is a price-fixing association in London for this purpose?

Colonel LANE FOX: That is exactly what I said.

WORKING HOURS.

Mr. PALING: 39.
asked the Secretary for Mines how many collieries who restarted work after the recent stoppage on a 7½-hours day have since reverted to an eight-hours day or have intimated their intention of doing so; and how many men will be affected thereby?

Colonel LANE FOX: I have not heard of any colliery in any district where a 7½-hour day is in operation having changed to an 8-hour day.

Mr. PALING: Has the right hon. Gentleman heard of any company that has given notice of their intention to put the Eight Hour Act into operation?

Colonel LANE FOX: The question of the hon. Member was, how many collieries have adopted it? I do not know of one.

Mr. PALING: 40.
asked the Secretary for Mines how many European countries have, since January this year, instituted a longer working day for coalminers or have given notice of their intention of doing so.

Colonel LANE FOX: So far as my information goes no European country has instituted a longer working day for coalminers during the present year nor am I aware that any country has given notice of intention to do so.

Mr. MARDY JONES: Is the right hon. Gentleman not aware that in France there is a strike looming ahead on this very question at the present time; and is he aware that the coalowners of Germany have intimated their intention to extend the hours as a result of the extension of hours in this country.

Colonel LANE FOX: I have no information on that.

Mr. JONES: Is the intention of the Chancellor of the Exchequer to abolish the Mines Department due to the failure of the Secretary for Mines to reply to questions?

Colonel LANE FOX: I would refer the hon. Member to the Budget speech yesterday.

GERMAN CONTRACTS.

Mr. JAMES BROWN: 41.
asked the Secretary for Mines whether his attention has been drawn to contracts recently
made by the Berlin municipal authorities for the purchase of British gas coal at 19s. 7d. per ton; whether he will give the price paid for similar coal during the corresponding period of the previous year; and will he state what is paid for coal for similar purposes in this country?

Colonel LANE FOX: I have no information as to this transaction beyond references in the Press nor am I able to give figures for the corresponding period of last year. I understand from the trade journals that market quotations for coal for similar purposes in this country range, according to quality, from 14s. to 21s. at the pit.

WORLD OUTPUT.

Mr. JOHN: 44.
asked the Secretary for Mines the average monthly world output of coal during the years 1910, 1913, 1925, and 1926, respectively?

Colonel LANE FOX: The estimated average monthly production of coal in the world in 1910 was 86.5 million tons, in 1913, 99.5 million, in 1925, 97.2 million, and so far as information is at present available it amounted to approximately 96.8 million tons in 1926.

COLLIERIES (DAYS WORKED).

Mr. TINKER: 60.
asked the Secretary for Mines if his Department is supplied by individual collieries with returns showing the number of days worked each week; and, if so, will he state the number of collieries that worked less than five days a week during January and February and what percentage this is of the whole of the persons employed?

Colonel LANE FOX: Yes, Sir, and certain particulars are published monthly in the "Labour Gazette." The returns are not tabulated according to the number of collieries but on the basis of the number of workpeople affected. From this it appears that the average weekly number of wage-earners employed during January and February was nearly one million, and that on the average about 22 per cent. of this number were employed at pits which lost more than one coal-winding day per week.

OUTPUT (COMPARISONS).

Mr. BATEY: 61.
asked the Secretary for Mines the output per person of all kinds of coal, excluding lignite, in this
country, and also in France, Belgium, and Germany, during the latest three months for which figures are available?

Colonel LANE FOX: The approximate figures are as follow: Great Britain 65 tons, France 41, Belgium 40, and Germany (Ruhr) 79. The periods taken are January-March, 1927, for Great Britain and November, 1926-January, 1927, in the case of the other countries. The hon. Member should bear in mind that the output per person is affected by the regularity of employment.

Mr. BATEY: Can the right hon. Gentleman give any reason for the much larger increase in Germany than in this country?

Colonel LANE FOX: Yes, I think it is probably in part due to the hours of employment.

Mr. MARDY JONES: Is it not a fact that the chief reason given by the mining experts is the much better organised conditions of the mines in regard to the capacity to produce?

Colonel LANE FOX: No, Sir, I do not think there is a great deal in that.

Mr. T. WILLIAMS: Is it not a fact that in the case of British mine workers, had they worked full time, the output per person would have been much greater than that in the Ruhr?

Colonel LANE FOX: I think that is quite possible.

COAL RAISED, DURHAM.

Mr. R. RICHARDSON: 63.
asked the Secretary for Mines what was the amount of coal raised from the mines in the County of Durham for the months of February and March of this year, and the corresponding months of the years 1914, 1925 and 1926, together with the pit-head selling prices for the like periods?

Colonel LANE FOX: During February and March, 1914, it is estimated that the output of coal in Durham was 6,679,000 tons. The corresponding figures for the years 1925, 1926 and 1927 were 5,585,000, 5,893,000 and 6,140,000, respectively. Monthly figures of pithead prices were not collected in 1914, but it is estimated that for the year as a whole the average pit-head price of all coal disposed of com
mercially in Durham was, approximately, 11s. per ton; the average figure for February and March, 1925, was 17s. 6½d., and for 1926, 13s. 9¾d. In February, 1927, it was 15s. 7¼d.; the figure for March, 1927, is not yet available.

MINES AT WORK.

Captain GARRO-JONES: 64.
asked the Secretary for Mines how many coal mines were open at the commencement of the coal stoppage; and how many are open at present?

Colonel LANE FOX: I would refer the hon. and gallant Member to the reply given to the hon. Member for Pontypridd on the 15th March, since when the position has not changed materially.

Oral Answers to Questions — SAFEGUARDING OF INDUSTRIES.

LEATHER GLOVES (PRICES).

Mr. GREENE: 13.
asked the President of the Board of Trade whether there has been any alteration in the wholesale price of British-made leather gloves since the gloving industry has been safeguarded; and, if so, will he state what the alteration is?

Sir P. CUNLIFFE-LISTER: From information furnished to me by the Joint Industrial Council for the Glove Making Industry, it appears that the average net prices charged to the wholesalers by the manufacturers of British leather gloves during 1926 show a reduction of from 3 to 6 per cent., according to kind, as compared with 1925.

Mr. GREENE: Is it not a fact that in this case, at any rate, safeguarding has brought about increased production and that increased production has brought about lower prices?

Mr. T. WILLIAMS: Is not the reply of the right hon. Gentleman inconsistent with the experience of anyone who goes to purchase a pair of gloves?

Sir P. CUNLIFFE-LISTER: I do not think so. What I was asked for was the effect of prices as between manufacturers and wholesalers, and I have given it.

Lieut.-Commander KENWORTHY: Is it not obvious that if you protect a few
selected industries in a Free Trade country, you will get comparatively good results?

Sir P. CUNLIFFE-LISTER: I have always thought that—

Mr. SPEAKER: We cannot have a fiscal debate.

Mr. GREENE: May I ask a further supplementary question?

Mr. SPEAKER: The supplementary question of the hon. Member was in the nature of a fiscal argument.

PROCEDURE.

Sir PARK GOFF: 46.
asked the Prime Minister, seeing that the White Paper on Safeguarding of Industry, being based on Cabinet decisions, is unalterable by the Board of Trade, and that the restrictions contained therein are regarded by applicants for safeguarding as vexatious and the cause of unnecessary delay and expense, whether he is prepared to receive representations with a view to its amendment?

The CHANCELLOR of the EXCHEQUER (Mr. Churchill): The representations made on this subject to my right hon. Friend the President of the Board of Trade have been very carefully considered, but the Government are not prepared to modify the procedure and conditions laid down in the White Paper.

Commander BELLAIRS: Can the right hon. Gentleman tell us why we have this elaborate procedure when, in the case of a duty on tyres, to which he devoted only one minute of his speech, it is in operation by midnight?

Mr. CHURCHILL: The procedure under the Safeguarding of Industries Act arises from the general policy of the Government declared at the last General Election. Nothing in that policy was ever intended to impair the full freedom of the Exchequer to deal with these matters on a revenue basis.

Mr. A. V. ALEXANDER: Are we to understand that the industries of this country are now to be given some respite from these continual interruptions?

Mr. CHURCHILL: I do not think that arises from anything in the original question.

Mr. KIRKWOOD: Is it the case that the right hon. Gentleman, before he accepted the Chancellorship, said to the Prime Minister, "Unless I can do what I like, I am not going to take the job"?

WRAPPING PAPER DUTY.

Mr. A. V. ALEXANDER: 57.
asked the Financial Secretary to the Treasury whether the wrapping paper duty is being charged on bakilised paper used exclusively for electrical insulation purposes; and, if so, whether the duty is levied on the value of the body-paper or on the manufactured value?

Mr. McNEILL: I understand that bakelised paper consists of paper with a coating of varnish or other material, and that the body paper is usually of a dutiable description. In such cases, duty is chargeable under Sub-section (2) of Section 11 of the Finance Act, 1926, on the value of the coated paper, as a whole if within the limits of dutiable weight.

Mr. ALEXANDER: Is the right hon. Gentleman aware that very great inconvenience is being caused in the trade in this insulated paper, and can he now give instructions which will secure that the tax is levied only on wrapping paper as intended by the Act?

Mr. McNEILL: I am not aware of the inconvenience referred to, but in any case the matter is regulated by Statute and I have no power.

Mr. ALEXANDER: Is the right hon. Gentleman not aware that it is regulated by the Regulations of the Treasury and not by the Act of Parliament? His Department gives instructions as to whether or not the manufacturing value of paper or only the body value is to be taken into account.

Mr. McNEILL: If the hon. Gentleman will look at Section 11, Sub-section (2), of the Finance Act of last year, he will see what is required.

Oral Answers to Questions — BRITISH ARMY.

MILLBANK HOSPITAL (RECREATION).

Viscount SANDON: 14.
asked the Secretary of State for War whether recreational accommodation such as existed before the War can be restored
for officers and other ranks who are patients in the military hospital at Millbank; and how much would it cost to effect this?

The SECRETARY of STATE for WAR (Sir Laming Worthington- Evans): I am not sure to what my Noble Friend refers. Generally speaking, the recreational facilities at Millbank are, I am informed, better than they were before the War.

Viscount SANDON: Is it not a fact that before the War there was a room with a billiard table in it?

Sir L. WORTHINGTON-EVANS: I will make inquiries, and see what has become of it.

REMOUNT SERVICE.

Viscount SANDON: 16.
asked the Secretary of State for War how many officers are employed in the remount service of the Army at Home; what is the total of pay and allowances under this head; whether any steps can be taken to reduce their number; and whether he can give any statistics or information as to the volume of work which passes through the hands of such an officer in a year?

Sir L. WORTHINGTON- EVANS: There are 78 officers of the Remount Service and their emoluments total approximately £27,000 a year. The numbers are continuously under review with a view to their possible reduction. As regards the last part of the question, it would hardly be possible in a reply to measure the volume of the diverse duties on which these officers are engaged.

Viscount SANDON: Would not this be a very good moment to reconsider the whole question?

Sir L. WORTHINGTON- EVANS: Some remount officers are necessary. Perhaps my hon. Friend does not know that they also engage in selecting civilians' horses, ear-marking civilian horses for possible use.

SURPLUS BOOT STORES (SALES).

Sir MERVYN MANNINGHAMBULLER: 17.
asked the Secretary of State for War if his attention has been called to a newspaper advertisement announcing the further release for sale by his Department of B5 regulation Army boots; if he will state how many pairs of such
boots have been sold to any firms within each of the last five years; the price at which such boots were sold; and the dates on which the boots were originally supplied by the contractor to the Royal Army Clothing Department, and the price paid for them?

The FINANCIAL SECRETARY to the WAR OFFICE (Captain Douglas King): The answer to the first part of the question is in the affirmative. As regards the second part, I am only in a position to give the information from 1st April, 1923—the date on which the War Department took over from the late Disposals Board the responsibility for the sale of Army boots. The figures for this period are:




Pairs.


April to December, 1923
…
Nil.


1924
…
20,895


1925
…
66,435


1926
…
20,188


As regards the third part, it is contrary to established practice to disclose contract prices, and as regards the last part, these boots were part of the supplies delivered during the War, and it is not possible to give the various dates on which they were received.

Sir M. MANNINGHAM-BULLER: Is the hon. and gallant Member not aware of the considerable damage that is done to the trade by a sudden dumping upon the market of these boots below cost price?

Captain KING: I am afraid we have to sell surplus stores. I am not aware of the damage to which the hon. and gallant Member refers.

Mr. BECKETT: Can the hon. and gallant Member say whether the loss on these boots is small enough to justify keeping them until they are required?

Captain KING: The next question deals with that matter.

Mr. R. MORRISON: Can the hon. and gallant Member say why it is impossible for these boots to be used in the Army in the ordinary way?

Captain KING: I will answer that on the next question.

Sir M. MANNINGHAM-BULLER: 18.
asked the Secretary of State for War if he is aware that in December last a con
siderable number of boots from unused war stocks considered unfit for Army requirements were sold to dealers in surplus stocks; if such boots were inspected and passed into store; upon what grounds they were considered as unfit for Army requirements; and whether it is the policy, and, if not, why, to hold over any excessive stock at any period and take it into consideration when further orders are issued?

Captain KING: The answer to the first, second and last parts of the question is in the affirmative. As regards the third part, the boots, which were made of War-time material, were found unfit for Army requirements, owing to deterioration of the leather.

RECRUITS UNDER 18 YEARS.

Mr. ROBINSON: 19.
asked the Secretary of State for War if he will issue instructions that lads under 18 years of age are not to be accepted as recruits for the Army and that all recruits must submit a birth certificate showing age?

Sir L. WORTHINGTON-EVANS: I would refer the hon. Member to the statement which I made on this subject during the Committee stage of the Army and Air Force (Annual) Bill.

NAVY, ARMY AND AIR FORCE INSTITUTE.

Lieut.-Colonel HOWARD-BURY: 15.
asked the Secretary of State for War whether, seeing that the Navy, Army, and Air Force Institute distribute their profits to Regular units in the form of a flat rate of even amount to all units according to their strength, whereas, in making the return to Territorial units the percentage is uneven and according to the profit made in the particular Territorial camp, some of which are popular camps and others unpopular ones, he will consider the more equitable method of pooling the profits made in all Territorial camps and distributing them in a similar manner to that done in Regular units?

Sir L. WORTHINGTON-EVANS: I do not think that such a scheme could be successfully adopted in the case of the Territorial Army, where the employment of the Navy, Army and Air Force Institutes is not obligatory on all units, as it is in the Regular Army.

Lieut.-Colonel HOWARD-BURY: Is the right hon. Gentleman aware that in certain camps which are bad and unpopular camps, no rebate whatever is given, and yet the Territorials have to go to those camps whether they like or not?

Sir L. WORTHINGTON-EVANS: I think it is not obligatory to have the Navy, Army and Air Force Institute unless they like.

SHANGHAI DEFENCE FORCE.

Mr. THURTLE: 21.
asked the Secretary of State for War whether any reservists of Sections B and D of the Army Reserve were called up for service recently with the Shanghai Defence Force; and, if so, how many?

Sir L. WORTHINGTON-EVANS: No such reservists have been called up for service with the Shanghai Defence Force.

Mr. THURTLE: 22.
asked the Secretary of State for War how many reservists were called up for service in the Shanghai Defence Force; and how many responded to the call?

Sir L. WORTHINGTON-EVANS: 1813 Section A Reservists were originally called up for service with the Shanghai Defence Force. Of these, only four were absent without sufficient reason. A week ago, a further 1,160, approximately, were called up in connection with the despatch of the brigade now under orders for China. Of these, less than 20 are at present unaccounted for, and probably in many of the cases there will be a good reason for the man's failure to report.

Mr. THURTLE: Can the right hon. Gentleman say whether any reservists of sections B and D have been called up recently for any other purpose except that of annual training?

Sir L. WORTHINGTON-EVANS: Not that I am aware.

Mr. BECKETT: Is it not possible to transfer troops from a similar unit to the units required for service, as was done during the War, rather than call up reservists who have settled themselves in civil life and who are unnecessarily disturbed when they are called up, whereas there are others who would be available?

Sir L. WORTHINGTON-EVANS: I do not think that the figures I have given show that there is any reluctance on the part of the reservists to answer the call.

Mr. BECKETT: I did not suggest that—

Mr. SPEAKER: I suggest that the hon. Member should put that Question on the Paper. It seems to me to be raising a new issue.

AUSTRALIAN MACHINE GUNNERS.

Sir NEWTON MOORE: 24.
asked the Secretary of State for War whether any records exist in his Department as to orders issued by general officers of the Australian forces during the Great War as to penalties that would be inflicted upon machine gunners who might be guilty of quitting their posts; and, if so, whether he will state them to the House?

Sir L. WORTHINGTON- EVANS: There are no records of any such orders.

Sir N. MOORE: Is the right hon. Gentleman not aware that one hon. and gallant Member made a statement that in the Australian Machine Gun Corps an order was issued that any man leaving his post would be shot? As a matter of fact, has he any information as regards that order?

Lieut.-Commander KENWORTHY: On a point of Order. May I ask whether the hon. Member has given notice to my colleague the hon. and gallant Member for North-West Hull (Lieut.-Colonel Lambert Ward) intimating that he intended to raise this question?

Sir N. MOORE: I did so three or four days ago. I recognise the hon. and gallant Member's courtesy in alluding to it.

Sir L. WORTHINGTON-EVANS: I have conferred with my hon. and gallant Friend who made the statement in the House, and both he and I are satisfied that the document he saw did not necessarily bear the interpretation put upon it.

Oral Answers to Questions — SCOTLAND.

WEIR HOUSES (FIRE RESISTING PROPERTIES).

Viscount SANDON: 28.
asked the Secretary of State for Scotland whether he can now give any information as to the fire resisting properties of Weir houses, in view of the destruction of two such houses early in February, owing to the failure of the asbestos partition walls?

The SECRETARY of STATE for SCOTLAND (Sir John Gilmour): So far as can be ascertained, the destruction of the two houses in question was not due to the failure of the asbestos partition walls, but to a small crack in the lower portion of the chimney stack where the iron flue pipe from the range entered the concrete flue block. The installation of ranges in houses of this type is unusual, and was done at the request of the local authority, but steps have been taken to ensure that no similar defect exists in the houses that have been fitted with ranges and that any ranges installed in future houses will be placed in fireplace openings constructed entirely of concrete and connected direct with the concrete flues of the chimney stack. In the houses of this type erected and to be erected by the Second Scottish National Housing Company (Housing Trust), Limited, the fitting in the living rooms is an interior grate with an iron mantel-piece, and I am advised that this fitting should obviate all danger of fire therefrom.

SCARISTAVEG FARM (PROSECUTIONS).

Mr. MAXTON: 35.
asked the Lord Advocate who was responsible for initiating a prosecution against the smallholders in South Harris; and if this action was taken after consultation with the Secretary of State for Scotland?

The LORD ADVOCATE (Mr. William Watson): The hon. Member no doubt refers to the recent proceedings in the Sheriff Court at Lochmaddy, when five persons were sentenced to two months' imprisonment for breach of interdict. Interdict was obtained at the instance of the proprietor of a farm of which the individuals referred to had taken possession, and a petition and complaint for breach of the interdict in which the sentence was pronounced was brought
by the proprietor of the estate with the concurrence of the Procurator Fiscal, which concurrence was given in ordinary course. My right hon. Friend intimated through the Board of Agriculture to the proprietor of the farm that, if he could make it available for the possession of smallholders to be selected by the Board, the contemplated scheme for settlement of such smallholders on the farm would be proceeded with. My right hon. Friend had no part in the proceedings, in regard to which he has no jurisdiction.

Mr. MAXTON: Has the Secretary of State for Scotland been able to take any steps to relieve the distress of the dependants of these men, and is he considering a remission of their sentences?

The LORD ADVOCATE: That does not arise out of this question.

Mr. MACQUISTEN: Did the Board of Agriculture guarantee to the proprietor the cost of taking proceedings against these men? Did they facilitate him in doing it?

The LORD ADVOCATE: No guarantee was offered or given.

Mr. JOHNSTON: Can the Lord Advocate say whether or not it is the case that these men were served with notice to appear at the Sheriff Court on 31st March and that they were arrested prior to that date?

The LORD ADVOCATE: There is a question down about that for to-morrow.

Mr. KIRKWOOD: We are raising that matter on the Adjournment to-morrow night.

HOUSE OF COMMONS ATTENDANCE BILL.

Mr. BECKETT: 45.
asked the Prime Minister whether he will give facilities for the Second Reading of the House of Commons Attendance Bill?

Mr. CHURCHILL: No, Sir. My right hon. Friend can hold out no prospect of facilities for this Bill.

Mr. BECKETT: Is the right hon. Gentleman aware that there is a very
strong feeling in the Bosworth Division in regard to this?

Mr. CHURCHILL: No, I am not.

Sir HARRY BRITTAIN: Would not the House of Commons be a much better place if some hon. Members were absent?

Oral Answers to Questions — GOVERNMENT DEPARTMENTS.

CIVIL SERVICE.

Captain CROOKSHANK: 49.
asked the Chancellor of the Exchequer if his attention has been called to the fact that, in the nine classes of the Civil Estimates and in those for the Revenue Departments for the current financial year, 110 of the sub-heads, salaries, wages and allowances, show an increase, and only 66 a decrease compared with the previous year; and whether he can assure the House that he is taking every possible step to reduce the cost of the administration of the country?

Mr. CHURCHILL: I am fully aware of the variations in the sub-heads relating to salaries, wages and allowances in the Estimates referred to in the first part of my hon. and gallant Friend's question. With regard to the last part of the question, I would refer him to the statement which I made yesterday in introducing the Budget.

Sir FRANK SANDERSON: 58.
asked the Financial Secretary to the Treasury how many civil servants are to-day receiving a salary of £1,000 a year and over; and how many were receiving a salary of £1,000 and over in 1914?

Mr. McNEILL: Particulars as to the number of Civil Servants receiving £1,000 per annum and over including bonus now and in 1914 could not be made available without calling upon the departments to make a special Return. A Return has already been presented to Parliament showing for the years 1913–14 and 1925–26 appointments in the Public Service carrying remuneration of £2,000 per annum and upwards. The changes to be made in the Return in respect of the year 1926–27 were given in the reply made to my hon. and gallant Friend the Member for Eastbourne on the 14th December last. The expenditure involved in producing a Return giving the number of all appointments carrying £1,000 per annum and upwards would not, I think, be justified.

MINISTRY OF TRANSPORT.

Captain CROOKSHANK: 50.
asked the Chancellor of the Exchequer if he is aware that in the Estimates for 1924–25 the staff of the Ministry of Transport, as shown in sub-head A, was 428, and the cost of salaries, wages and allowances was £193,537; and that in the succeeding Estimates the staff has increased each year, first to 464, then to 524, and this year to 553 at an estimated cost of £212,827; and whether he will explain to the House why this Department has had to be increased by over 23 per cent. since 1924, and what steps are being taken to check this increase?

The MINISTER of TRANSPORT (Colonel Ashley): I have been asked to reply to this question.
The number of charwomen (29) were not shown in the Estimates for 1924–25, and the comparable numbers of the staff for that year and for 1927 are 457 and 533, respectively, an increase of 96. In addition, provision for temporary engineering and clerical staff in the Roads Department was made in 1924–25 to the amount of £25,000, but a reduced provision of £18,000 is taken in the Estimates for 1927. The increase in numbers has occurred entirely in the Roads Department, and is attributable partly to the work arising out of the London Traffic Act, 1924, which accounts for 46 additional officers, and partly to the general development of the work of that Department. The volume and number of grants from the Road Fund have considerably increased, and they are now being made for a greater variety of purposes and to a larger number of authorities. The number of grants rose from 5,503 in 1924–25 to 6,553 in 1926–27. The cost of this additional staff is recoverable from the Road Fund, and I am satisfied that no unnecessary additions have been made. There has been a slight decrease in the numbers of the staff employed in other Departments of the Ministry.

Mr. R. HUDSON: May I ask whether the abolition of these Ministries is going to reduce these numbers?

GOVERNMENT PRINTING WORKS.

Sir BASIL PETO: 56.
asked the Financial Secretary whether the Government propose to take any action on the Report of the Committee of Inquiry into the Government printing establishments; and, particularly, whether it is intended to close
down the Government works at Harrow and elsewhere?

Mr. McNEILL: The Report is at present under consideration.

Oral Answers to Questions — BUDGET.

LADIES' HATS.

Colonel APPLIN: 51.
asked the Chancellor of the Exchequer whether he will consider an ad valorem tax on ladies' hats; and whether he can give the estimated yield of a 10 per centum tax on the retail price of such hats?

Mr. CHURCHILL: My financial proposals for the year are already before the House. There is no information available which would enable me to give the estimate asked for in the second part of the question.

Colonel APPLIN: May I ask whether the right hon. Gentleman is aware that, at the very least, 50,000,000 hats are sold every year to ladies, and that a 10 per cent. duty on these hats at the very low estimate of 5s. a hat, would bring in £1,250,000 a year?

Mr. CHURCHILL: I think I have enough blood on my hands already.

Mr. BROAD: Will the right hon. Gentleman consider putting a tax on spats?

Lieut.-Commander KENWORTHY: If the right hon. Gentleman is examining these proposals, will he, as a person specially interested, also look into the question of men's hats?

Mr. CHURCHILL: I have completely finished with new taxation for the present year.

Brigadier-General Sir HENRY CROFT: Will the right hon. Gentleman also bear in mind the excellent practice, which has been already initiated in other respects, of seeing that this duty shall fall on foreign houses?

Mr. KIRKWOOD: Put it on the brass hats.

GOVERNMENT DEPARTMENTS (ABOLITION).

Mr. GILLETT: 52.
asked the Chancellor of the Exchequer what would be the estimated saving if the Overseas Trade Department, the Ministry of Transport,
and the Department of Mines were closed, allowance being made for the expense of such work as must be taken over by other departments?

Mr. CHURCHILL: The transfer of the work of these three departments to others would not, in itself, as I stated yesterday, effect any large saving. A substantial reduction in expenditure could only be effected by discontinuance of functions at present required of them, and its amount would necessarily depend on the extent to which such functions, which are in many cases statutory, were abandoned. These aspects will be examined in detail when the necessary legislation is presented to Parliament.

Colonel DAY: Can the right hon. Gentleman say which Departments will take over the duties of the Ministries that are being abolished?

Mr. CHURCHILL: No, Sir. It will undoubtedly be made known at a later stage; in any case it must be fully explained before the Bill is introduced.

Mr. R. MORRISON: Does the answer mean, in effect, that the abolition of these Departments is not essentially an economy proposal?

Mr. CHURCHILL: I referred yesterday to the abolition in terms which show that while it does not produce an immediate large and material saving, it indicates the spirit in which His Majesty's Government are addressing themselves to their duty in regard to the task of the curtailment of expenditure.

Mr. BATEY: Can the right hon. Gentleman say what is the estimated saving by the abolition of the Mines Department?

Mr. CHURCHILL: I think that is covered by my answer which dealt with the three Departments.

Mr. BATEY: Can the right hon. Gentleman tell us what the saving will be on the Mines Department?

Mr. CHURCHILL: I cannot give any exact figure that will be saved in regard to these Departments, either together or separately, but I am sure I am glad to receive from the hon. Member the tribute he has paid to the administration of the Mines Department by my right hon. Friend.

Mr. T. WILLIAMS: Are we to assume that up to the moment no decision has been reached with regard to the redistribution of the functions of the three Departments referred to?

Mr. CHURCHILL: No, Sir. I could not say that. The object and intention of the Government is to effect economy, not only by the absorption of Departments, but by reduction in expenditure, and the details of that will be laid before Parliament in due course before legislation is passed.

Mr. MARDY JONES: Is the right hon. Gentleman aware that, as a result of his statement yesterday, as to the merging of the Mines Department in the Board of Trade, an impression is being created among the mining population that it is part of the scheme of the Government to back out of the conditions with regard to the reorganisation of mining entered into in 1926?

Mr. CHURCHILL: I am sure we can rely on the hon. Member correcting such an utterly erroneous impression.

INCOME TAX.

Mr. SHORT: 53.
asked the Chancellor of the Exchequer the number of persons paying Income Tax during 1924–25 and 1925–26, respectively?

Mr. CHURCHILL: The numbers of liable persons paying tax in the years in question are estimated at 2,400,000 for the year 1924–25 and 2,300,000 for the year 1925–26.

Mr. MACQUISTEN: Does that disclose the number of people of the rentier class whose tax is deducted at the source?

Mr. SHORT: Does the right hon. Gentleman mean that they actually pay Income Tax?

Mr. CHURCHILL: Yes, Sir.

NATIONAL GALLERY (SIR HUGH LANE'S BEQUESTS).

Lieut.-Colonel HOWARD-BURY: 55.
asked the Financial Secretary to the Treasury whether he will consider the advisability of making a loan for an indefinite period of all the Lane pictures to the Irish Free State?

Mr. McNEILL: I would refer my hon. and gallant Friend to the answer given by the Prime Minister in reply to a question by my hon. and gallant Friend the Member for Ripon on the 5th July last, to which I have nothing to add.

Lieut.-Colonel HOWARD-BURY: Is my right hon. Friend aware that while this collection is a matter of only small importance to this country, which is rich in Art Galleries, it is of very great importance to the people of Ireland, and will he not consider a permanent loan which would carry out the testator's wishes, without the need of an extra Act of Parliament, and so earn the gratitude of the people of Ireland?

Mr. McNEILL: If the hon. and gallant Gentleman will read my answer, he will find the information for which he asks.

Lieut.-Commander KENWORTHY: Is it not a fact that these pictures have attracted little attention in this country, but that the whole of Ireland has expressed the deepest interest in them?

Lieut.-Colonel HOWARD-BURY: Will my right hon. Friend not consider the reviewing of the whole of this question?

Colonel DAY: Can the right hon. Gentleman say what is the amount of the loan mentioned in the question?

Oral Answers to Questions — TRANSPORT.

PUTNEY-WIMBLEDON RAILWAY SERVICE.

Sir J. POWER: 60.
asked the Minister of Transport if he is aware that trains running on the Putney and Wimbledon line are frequently reduced in length before the morning rush traffic has come to an end; and if he will make representations on the matter to the Metropolitan District Railway, with a view to preventing the consequent avoidable overcrowding that occurs on some mornings?

Colonel ASHLEY: Since my hon. Friend gave notice of his question, the railway company concerned have taken records of the loadings of the trains on the Putney and Wimbledon line, and have furnished me with particulars showing the number of persons travelling between 9.30 and 11.30 a.m. on certain dates. These particulars indicate that the capacity of the trains between 10.30
and 11.30 a.m. exceeds the number of persons travelling, and the company have informed me that they cannot see that any adjustment in the composition of the trains is required. I have no doubt, however, that they would be glad to consider any additional information which my hon. Friend may be prepared to furnish on this point.

TYNDRUM-BALLACHULISH ROAD.

Mr. MACQUISTEN: 67.
asked the Minister of Transport what progress is being made with the Tyndrum-Ballachulish road; what is or was the approximate date of the commencement of its construction; and what has been spent on surveying the ground for this road?

Colonel ASHLEY: As stated on the 24th March in my reply to one of the hon. Members for Dundee, I hope that tenders will very shortly be invited by the Argyll County Council for the first section of these road works. The expenditure up to date upon surveys, the study of alternative locations, the preparation of plans and specifications and upon preliminary investigations generally has been about £15,000.

Mr. MACQUISTEN: Will the right hon. and gallant Gentleman take into consideration the statement made yesterday by the Chancellor of the Exchequer that the Ministry of Transport was unable to sustain the Road Fund; and will he take the opportunity of that statement in order to get sufficient money to proceed with this road and other necessary roads in the Highlands?

Colonel ASHLEY: The hon. and learned Gentleman seems to want more money for Scotland.

Mr. MACQUISTEN: That is so.

Mr. JOHNSTON: Arising out of the original answer, what reply has the Minister received from the county council to his request that in future they should take labour from the Employment Exchanges for the roads?

Colonel ASHLEY: I must have notice of that question.

Mr. JOHNSTON: You promised it

Mr. KIRKWOOD: Will the action of the Chancellor of the Exchequer in raiding the Road Fund have any effect in
stopping roads like this from being completed?

Colonel ASHLEY: No, provision is made for this West Highland road.

Oral Answers to Questions — POST OFFICE.

TELEPHONE SERVICE.

Colonel DAY: 68.
asked the Postmaster-General the amount of money that he has in hand as deposits from telephone subscribers on account of trunk fees, telegraph, or other services in connection with the telephone service?

The ASSISTANT POSTMASTER-GENERAL (Viscount Wolmer): The amount is approximately £2,280,000.

Colonel DAY: Can the Noble Lord say how much of that amount belongs to former telephone subscribers who are not now subscribers to the Post Office?

Viscount WOLMER: No, Sir; I cannot without notice, but it is a comparatively small amount.

Colonel DAY: What steps are taken to see that these people get their money back?

Viscount WOLMER: They get it back upon application.

Mr. A. V. ALEXANDER: Can the Noble Lord assure us, speaking for the Post Office, that these balances are secure from the "stand-and-deliver" tactics of the Chancellor?

Mr. R. W. SMITH: 72.
asked the Postmaster-General what has been the cause of the delay in opening the telephone exchange at Echt, Aberdeenshire; when he expects it will be opened; and when the subscribers who are to be connected to that exchange may expect to have their telephones installed and working?

Viscount WOLMER: The opening of this exchange depends on the completion of structural alterations to the post office. The premises are private property and the work, which is being carried out on the owner's instructions, is temporarily suspended; but I hope it will be resumed shortly. Service will be provided as soon as possible; but in the circumstances I am not in a position to give a definite date.

Mr. SMITH: Is the Noble Lord aware that it is over six months since the subscribers signed contracts for these telephones; and is it not rather apt to put people off getting in telephones, if it requires six months to have them fixed up?

Viscount WOLMER: I am aware of the delay, but the circumstances in this case have been somewhat exceptional. I hope the delay will not continue much longer.

Mr. SMITH: Is the Noble Lord aware that in another case in the same constituency it is about six months since the telephone subscribers signed the contracts?

Viscount WOLMER: If the hon. Member will be kind enough to give me particulars of that case, I shall be glad to look into it.

MONEY ORDER DEPARTMENT (OVERTIME).

Mr. MONTAGUE: 69 and 70.
asked the Postmaster-General (1) how much it would cost to substitute the work of suitable women who might be promoted from temporary writing assistants and typists to the clerical office staff for the overtime now worked by the present clerical staff at the money order office at Holloway, the figure relating to a period of three months;
(2) in view of the fact that in the year ending 31st October, 1926, 71,000 hours' overtime were worked by clerical officers, mainly women, employed at the money order department, Holloway post office, the cost amounting to £6,480, and that many women are working upwards of 12 hours a week overtime, if he will consider the advisability of increasing the women clerical officer staff by the promotion of suitable writing assistants and typists and re-engaging demobilised temporary women clerks to perform the present duties of such promoted assistants and typists?

Mr. R. MORRISON: 77 and 78.
asked the Postmaster-General (1) how many hours overtime were worked in the Money Order Department during the past year, and at what cost;
(2) how many women clerical officers in the Money Order Department are at present working overtime; whether the work is of an emergency character; and, if not, whether it is proposed to increase the staff?

Mr. PETHICK-LAWRENCE: 79.
asked the Postmaster-General whether his attention has been called to the fact that in the year ending 31st October, 1926, 72,100 hours of overtime were worked in the Money Order Department at a cost in wages alone of £6,480; that, at the present time, a large number of women clerical officers are in sections where eight hours a week compulsory overtime is the rule, and that there is considerable opposition among the staff to this systematic overtime; and whether, in the interests of efficiency and smooth working, he is now prepared to consider an increase in the number of the women clerical officers by the promotion of some of the 80 writing assistants and typists officially classed as suitable for promotion and a re-engagement of some of the demobilised temporary women clerks pending the availability of permanent writing assistants for the forthcoming open competitions?

Viscount WOLMER: The figures and cost of overtime in the Department are approximately as stated in the questions; but I cannot give any accurate estimate in reply to Question 69. The total number of hours overtime worked by the women clerical officers in 1926 was 51,940 at a cost of £3,003. Authority has now been given to increase the staff so as to absorb abnormal overtime. Some of the posts for women clerical officers will be filled by the promotion, after trial on the superior duties, of officers now serving in the Money Order Department as writing assistants or typists, and the remainder by successful candidates in the open competition. The writing assistant staff will be reinforced as soon as recruits from a recent competition are available and, for the short interval before this occurs, it seems scarcely desirable to engage temporary clerks.

Mr. MONTAGUE: Is it not a fact that 80 of these temporary women have been accepted as suitable already?

Viscount WOLMER: Yes, Sir, and some of these will be promoted.

ANGLO-AUSTRALIAN BEAM WIRELESS SERVICE.

Lieut.-Commander KENWORTHY: 73.
asked the Postmaster-General whether the Anglo-Australian beam wireless service
has been opened for public traffic; and whether any public ceremony has taken place or will take place in connection with the opening of this Imperial service of communications?

Viscount WOLMER: The Anglo-Australian beam wireless service was opened for public traffic at 6 a.m. on Friday, the 8th instant. No public ceremony took place in connection with the opening of the service, but a Press demonstration was given on Thursday, the 7th instant, when complimentary messages were exchanged between the Secretary of State for Dominion Affairs and the High Commissioner for Australia in London and the Governor-General and the Prime Minister of the Commonwealth in Melbourne.

Lieut.-Commander KENWORTHY: Does not the Noble Lord think that an opportunity was missed of pleasing both Australians and Englishmen in connection with the opening of this great service?

Viscount WOLMER: We had a formal opening in the sense which I have described. That, I understand, was in conformity with the suggestion that Australia made to us in the matter.

Sir H. BRITTAIN: 75.
asked the Postmaster-General whether the wireless beam service to Australia is now being successfully operated; and whether use of it is being made by the Press and the public up to the anticipation of his Department?

Viscount WOLMER: The answer to the first part of the question is in the affirmative. It is too early at present to express an opinion upon the volume of traffic.

PRINTED MATTER, DELIVERY.

Colonel APPLIN: 74.
asked the Postmaster-General whether he can give the reason for the delay in the delivery of ½d. printed matter through the letter post; and if he is aware of the loss and inconvenience caused to business men in the City through their failure to receive important price lists and market quotations by the forenoon deliveries through these delays?

Viscount WOLMER: I take it that my hon. and gallant Friend refers to the
regulation under which printed matter prepaid one halfpenny posted after a specified time—4.30 p.m. in the case of London—is not despatched the same day. This regulation was a condition of the reduction of the printed paper rate to one halfpenny in 1922. It gives considerable relief in sorting offices at the heaviest period of pressure, and enables the general night mails to be disposed of punctually and economically. I have from time to time received complaints of inconvenience caused through the holding over of late posted halfpenny matter, but I would point out that this can be avoided by posting before the prescribed hour or by prepaying urgent packets at the penny rate.

Colonel APPLIN: Will the Noble Lord consider whether he ought not to make an exception in the case of the City of London; and is he aware that these price lists and market quotations must be posted after the hour which he has named and that it is extremely inconvenient to the business of the City of London that these things should be received by the second post next day?

Viscount WOLMER: If the matter is urgent, I think it ought to pay full postage. The halfpenny rate is an exceedingly cheap rate, and it is only justifiable if the matter is posted at hours when the rest of the postal work is somewhat slack.

Colonel APPLIN: Is the Noble Lord aware that the particular matter to which I refer can only be posted in a halfpenny wrapper because it consists of market prices printed for the benefit of a large number of business men in the City of London; and will he give this matter his earnest consideration in the interests of the business community?

Viscount WOLMER: My hon. and gallant Friend is under a misapprehension. If the matter has paid the penny rate, it will not be delayed.

TELEVISION EXPERIMENTS.

Sir H. BRITTAIN: 76.
asked the Postmaster-General whether he has had his attention called to the results of experiments in television carried out in the United States; and whether any research of a similar nature is being undertaken in this country?

Viscount WOLMER: The answer to both questions is in the affirmative. As I informed the hon. Member for the Central Division of Southwark (Colonel Day) on the 8th March, the matter is not yet out of the experimental stage.

Sir H. BRITTAIN: Will the Noble Lord be very careful about encouraging what may prove to be a very tiresome invention?

Viscount WOLMER: The Post Office is bound to accept all inventions which may be for the service of the community, whether they are tiresome or not.

WIRELESS SPARK SIGNALS (ISLE OF WIGHT).

Mr. MONTAGUE: 71.
asked the Postmaster-General whether his attention has been called to the effect of spark signals sent out constantly by the Lloyds Wireless Station at Niton, Isle of Wight, which makes the wireless receiving sets for which licence fees have been paid in Sandown, Shanklin, Blackgang, and district practically valueless; and whether he will make representations to the company concerned as to the advisability of substituting continuous wave messages for spark signals to ships entering the Channel, etc.?

Viscount WOLMER: The wireless station at Niton, Isle of Wight, is a Post Office station used for communication with ships and in the interests of safety of life at sea. Although some interference with the reception of the Bournemouth broadcast programmes is unavoidable in the immediate vicinity of the Niton station, there should be no serious interference at Sandown, Shanklin and the district when reasonably selective receiving apparatus is used. The Daventry programmes can be received without difficulty even 200 yards only from the Niton aerial. An International Radiotelegraph Conference is to be held at Washington in the autumn of this year at which the question of spark transmission from ships will be considered. In the meantime it is not practicable to take any steps to restrict the use of spark apparatus on ships.

WAR PENSIONS (ADMINISTRATIVE AREAS).

Mr. HORE-BELISHA: 80.
asked the Minister of Pensions how many administrative areas have been closed; and in how many cases protests were made by the War Pensions Committee?

The PARLIAMENTARY SECRETARY to the MINISTRY of PENSIONS (Lieut.-Colonel Stanley): If the hon. Member refers to areas constituted under Section 1 of the War Pensions Act, 1921, the reply is that no such areas have been closed but that eight areas have been reduced to four by amalgamations to which the Committees concerned have agreed. If, however, the hon. Member has in mind changes in the arrangements made for the medical administrative areas the reply is that combinations of medical staff have been carried out in some 25 areas during the past three years, and in no case have protests been made by War Pensions Committees in the districts concerned.

Oral Answers to Questions — ROYAL NAVY.

AIRCRAFT CARRIERS.

Mr. RENNIE SMITH: 84.
asked the First Lord of the Admiralty the names and the tonnage of all British aircraft carriers over 6,000 tons?

Commander BELLAIRS: On a point of Order. If the answer to a question be immediately available from official returns, as is the case in both this question and the next, is the question allowable?

Mr. SPEAKER: I think hon. Members should not put questions on the Paper where the answer is available in official papers, but this has been passed and had better be asked.

The FINANCIAL SECRETARY to the ADMIRALTY (Lieut.-Colonel Headlam): The desired information will be found on page 24 of Command Paper 2809, "Fleet (The British Empire and Foreign Countries)," which was recently laid before Parliament.

BATTLESHIPS.

Mr. R. SMITH: 85.
also asked the First Lord of the Admiralty the names and the size of all British battleships above 10,000 tons either in service or under construction?

Lieut.-Colonel HEADLAM: I would refer the hon. Member to page 5 of Command Paper 2809.

FUEL OIL.

Mr. CHARLES EDWARDS: 86.
asked the First Lord of the Admiralty what percentage of the oil purchased for naval purposes in the last financial year was produced in this country and what percentage was imported from abroad; from what countries the latter amount was imported; and how much was imported from each of such countries?

Lieut.-Colonel HEADLAM: If the hon. Member refers to fuel oil, the whole of the oil purchased for naval purposes in the last financial year was produced abroad. I regret that it is not in the public interest to give the further details requested.

MALTA (ASSISTED PASSAGES).

Mr. HORE-BELISHA: 87.
asked the First Lord of the Admiralty if he will consider the introduction of assisted passages to the wives and families of naval ratings serving at Malta similar to those in force for the Army and Royal Air Force?

Lieut.-Colonel HEADLAM: As "assisted passages," i.e., those towards which the Government contribute part of the cost, are not granted to the wives and families of Army and Royal Air Force personnel, I assume the hon. Member refers to "indulgence passages." Conditions of service in the Royal Navy differ from those in the Army and Royal Air Force, and I am afraid that an indulgence passage system similar to that in force in the other Services cannot be adopted. I might add, however, that, to meet the exceptional case of men who have been transferred from the Mediterranean to the China Station, indulgence passages for their wives and families to England will be granted in military transports when spare accommodation is available.

Mr. HORE-BELISHA: What is the reason for this discrimination against naval ratings as compared with the Army and the Air Force?

Lieut.-Colonel HEADLAM: It has been the custom in the service for a great many years, and the present financial
condition of the country makes it impossible to contemplate any alteration at the present time.

FLEET AIR ARM (STATUS OF PERSONNEL).

Mr. HORE-BELISHA: 88.
asked the First Lord of the Admiralty whether, seeing that petty officers and leading ratings of the Royal Navy are considered senior to sergeants and corporals of the Army, yet in the Fleet Air Arm they are placed in subordinate positions and are told that they are junior to the sergeants and corporals of the Royal Air Force, and that some doubt and dissatisfaction arise through this state of affairs, he can see his way to define by an Admiralty Fleet Order the status of naval ratings employed as personnel in the Fleet Air Arm?

Lieut.-Colonel HEADLAM: The position is that Chief Petty Officers rank with Colour Sergeants and Staff Sergeants in the Army and Flight Sergeants, Royal Air Force; that Petty Officers rank with Sergeants in the Army and Royal Air Force; that Leading Rates rank with, but junior to, Corporals and Bombadiers in the Army and Corporals in the Royal Air Force. The Ring's Regulations and Admiralty Instructions will be amended to make the matter clear.

INDIA (CHILD LABOUR).

Lieut.-Commander KENWORTHY: 82.
asked the Under-Secretary of State for India what is the minimum age at which children are allowed to work in India in the mines and factories, respectively?

The UNDER-SECRETARY of STATE for INDIA (Earl Winterton): The minimum age is 13 in mines and 12 in factories.

Lieut.-Commander KENWORTHY: Have any steps been taken to raise these ages?

Earl WINTERTON: The ages are really, for physical reasons due to climatic conditions, not comparable with those of European children. In the second place, this Bill, which is now the law, was only passed quite recently in the Assembly, and, so far as I am aware—I should have to refresh my memory—no proposal was made by unofficial members that the age should be
raised higher than that which was in the Government Bill. It is really a matter more for the Assembly than for this House.

Oral Answers to Questions — COAL TRADE DISPUTE.

POLICE, DURHAM COUNTY.

Mr. BATEY: 89.
asked the Secretary of State for the Home Department the total cost of police imported into Durham County during the coal dispute last year; the amount claimed by coal companies for the imported police stationed or visiting their collieries; and which these companies were?

Major Sir HARRY BARNSTON (for Sir W. JOYNSON-HICKS): The total cost was £8,944 18s. 3d. No claims of the kind mentioned in the second part of the question have been made.

PEACEFUL PICKETING (CONTRAVENTIONS).

Mr. BATEY: 90.
asked the Home Secretary the number of persons convicted of contravening the law as to peaceful picketing during the coal dispute last year?

Sir H. BARNSTON: Such contraventions were dealt with under various provisions of the law, and the only separate particulars that my right hon. Friend can give relate to convictions for offences under Section 7 of the Conspiracy and Protection of Property Act, 1875 (in most cases intimidation). The number of persons so convicted was 659.

Mr. BATEY: Are we to understand that there were no persons convicted for peaceful picketing during the coal dispute?

Sir H. BARNSTON: I should require notice of that question.

Captain GARRO-JONES: Can the hon. Baronet say whether there was a single prosecution brought which failed owing to the inadequacy of the law rather than owing to the inadequacy of the evidence?

Sir H. BARNSTON: I should like notice of that question also.

SMALL HOLDINGS.

Mr. HURD: 81.
asked the Minister of Agriculture which of the county councils in England had balances standing to the credit or debit of their small holdings
account at the termination of the last financial year; and the amount thereof in each case?

The MINISTER of AGRICULTURE (Mr. Guinness): I regret that the information desired by my hon. Friend is not available. I would explain, however, that no conclusion could be drawn from the state of a council's small holdings account on any particular date, as it is liable to sudden fluctuations caused by the maturing of obligations to or by the council in respect of rent, loan charges and other receipts or payments which fall due on different dates.

BUSINESS OF THE HOUSE.

Mr. CLYNES: May I ask the Parliamentary Secretary to the Treasury if he can state the business to be taken when the House resumes after Easter?

The PARLIAMENTARY SECRETARY to the TREASURY (Commander Eyres Monsell): On Tuesday, 26th April, on Wednesday, 27th April (until 8.15 p.m.), and on Thursday, 28th April, the Report stage of the Budget Resolutions, and, if time permit, other small Orders on the Paper.

Mr. CLYNES: Can my right hon. Friend inform the House when we shall have the Second Reading of the Trade Union Bill, and can he, on behalf of the Prime Minister, say anything regarding the Prime Minister's assurance that he would endeavour to make a statement before the House rose on Thursday with regard to proposals to extend the franchise?

Commander EYRES MONSELL: In regard to the first Supplementary Question, we shall commence the Second Reading of the Trade Union Bill on Monday, 2nd May. With regard to the second part of the right hon. Gentleman's question, I am not in a position to say when the Prime Minister will make a statement, but the right hon. Gentleman can rest assured that the statement will be made.

Mr. MACQUISTEN: Has my right hon. Friend observed the statement of the Solicitor-General that if a woman was capable of being a mother and
bringing up her children, she should have the franchise?

HON. MEMBERS: Order!

BALLOT FOR NOTICES OF MOTION.

ECONOMY IN GOVERNMENT DEPARTMENTS.

Lieut.-Colonel HENEAGE: I beg to give notice that, on Wednesday, 4th May, I shall call attention to the need of Economy in the Government Departments, and move a Resolution.

CO-PARTNERSHIP.

Major Sir GRANVILLE WHELER: I beg to give notice that, on Wednesday, 4th May, I shall call attention to the question of Co-partnership, and move a Resolution.

CO-OPERATIVE SOCIETIES (POLITICAL PARTIES).

Sir HERBERT NIELD: I beg to give notice that, on Wednesday, 4th May, I shall call attention to the position of Co-operative Societies in relation to Political Parties, and move a Resolution.

MEMBERS' SPEECHES (LIMITATION).

Sir ALEXANDER SPROT: I beg to give notice that, on Wednesday, 4th May, I shall call attention to the desirability of limiting the length of Speeches in this House, and move a Resolution.

ROYAL ASSENT.

Message to attend the Lords Commissioners.

The House went, and, having returned,

Mr. SPEAKER reported the Royal Assent to—

1. Royal and Parliamentary Titles Act, 1927.
2. Sale of Food and Drugs Act, 1927.
3. Forestry Act, 1927.
4. Army and Air Force (Annual) Act, 1927.
5. Nar Valley Drainage Act, 1927.
6. Yeadon Water Works Act, 1927.
7. Tyne Improvement Act, 1927.

BILLS REPORTED.

West Bromwich Corporation Bill,

Birmingham Extension Bill,

Reported, with Amendments; Reports to lie upon the Table, and to be printed.

CLUBS BILL,

"to amend the Law relating to the sale and supply of intoxicating liquors in clubs; and for purposes in connection therewith," presented by Mr. JAMES HUDSON; supported by Mr. Snowden, Mr. Rosslyn Mitchell, Mr. Morgan Jones, Mr. George Hall, Mr. Cecil Wilson, Mr. David Grenfell, Viscountess Astor, Mr. Morris, Mr. Ernest Brown, Major Owen, and Mr. Ellis Davies; to be read a Second time To-morrow, and to be printed. [Bill 114.]

SELECTION (STANDING COMMITTEES).

STANDING COMMITTEE A.

Mr. WILLIAM NICHOLSON reported from the Committee of Selection; That they had added the following Ten Members to Standing Committee A (in respect of the Seditious and Blasphemous Teaching to Children Bill): Mr. Rhys Davies, Secretary Sir William Joynson-Hicks, Mr. Lumley, Sir Basil Peto, Mrs. Philipson, Viscount Sandon, Mr. Snell, Mr. Somerville, Mr. Cecil Wilson, and Mr. Crompton Wood.

STANDING COMMITTEE B.

Mr. WILLIAM NICHOLSON further reported from the Committee; That they had discharged the following Member from Standing Committee B: Viscount Sandon; and had appointed in substitution: Brigadier-General Charteris.

Mr. WILLIAM NICHOLSON further reported from the Committee; That they had added the following Twenty-five, Members to Standing Committee B (in respect of the Landlord and Tenant (No. 2) Bill): Mr. Atkinson, Sir William Bull, Mr. Clarry, Major Crawford, Mr. Dalton, Mr. Hardie, Sir Gerald Hohler, Sir George Hume, Mr. George Jones, Mr. Haydn Jones, Secretary Sir William Joynson-Hicks, Mr. MacLaren, Sir Mervyn Manningham-Buller, Sir William Perring, Sir Philip Pilditch, Sir John Power, Mr. Rhys, Major Ruggles-Brise, Mr. Rye, Sir Henry Slesser, Mr. Solicitor-General, Mr. Spoor, Mr. Wellock, Mr. Withers, and Mr. Womersley.

Reports to lie upon the Table.

DISEASES OF ANIMALS (RE-COM- MITTED) BILL [LORDS].

Reported, with an amendment, from standing committee B.

Report to lie upon the Table, and to be printed. [No. 56.]

Minutes of the Proceedings of the Standing Committee to be printed. [No. 56.]

Bill, as amended (in the Standing Committee and on re-committal), to be taken into consideration upon Thursday, and to be printed. [Bill 116.]

MERCANTILE MARINE MEMORIAL BILL.

Reported, with an Amendment, from the Select Committee, with Minutes of Evidence.

Report to lie upon the Table, and to be printed. [No. 57.]

Bill, as amended in the Committee, re-committed to a Committee of the whole House for To-morrow, and to be printed. [Bill 115.]

POLICE DISTRICTS (SCOTLAND) BILL [Lords].

Read the first time; to be read a second time To-morrow, and to be printed. [Bill 118.]

WELSH CHURCH (BURIAL GROUNDS) BILL [Lords].

Read the first time; to be read a second time To-morrow, and to be printed. [Bill 11.]

POOR LAW BILL [Lords].

Read the first time; to be read a second time To-morrow, and to be printed. [Bill 117.]

Orders of the Day — WAYS AND MEANS.

Considered in Committee. [Progress 11th April.]

[Mr. JAMES HOPE in the Chair.]

Orders of the Day — AMENDMENT OF LAW.

Question again proposed,
That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with Finance.

4.0 p.m.

Mr. SNOWMEN: Yesterday the Chancellor of the Exchequer—[HON. MEMBERS: "Where is he?"] My hon. Friends have such admiration for the right hon. Gentleman that they are unwilling that the Debate should proceed without his presence. I see that he has now entered the House. Yesterday the Chancellor of the Exchequer said that he was in the position of the public executioner. The right hon. Gentleman mistook his role. He is not in the position of the public executioner but in the position of a condemned criminal, who, by an artful device, has obtained temporary reprieve. It would be difficult to withhold admiration of the audacity with which the right hon. Gentleman has met the position by which he was faced this year, and I certainly shall not withhold my meed of admiration in that respect. The first part of his speech yesterday was an excuse for the failure of the revenue to realise expectations and for the estimated expenditure having been considerably increased. He attributed this disastrous result to the industrial troubles of last year. Nobody will say that we can have a long and extensive industrial stoppage without its effects manifesting themselves not merely upon the revenue of the country but also upon the state of industry generally. But I deny that the fundamental reason for the state of the national finances at the end of last year was in the main to be attributed to the coal stoppage. That trouble began the year before, when the Government, in order to avert the stoppage in the in
dustry made a very considerable grant out of national funds as a subsidy to the industry.
I think I have a fairly clean record upon that matter, and therefore I am entitled, without criticism, to make this observation. I did not approve of the subsidy, I said that the only possible justification for that expenditure could be that it would secure the purpose for which the Government were making the grant. It failed to do that; the stoppage took place, and I maintain that the main responsibility for the prolongation of that dispute rests upon the shoulders of the Government. For seven months one of the greatest industries of the country was paralized because mineowners and men were unable to cone to an arrangement between themselves. Before the stoppage, and during the stoppage, the Government constantly intervened. Why did the Government appoint that Royal Commission? Surely not for the purpose of ignoring its findings, and, if a Government is to govern, if a Government is to have any responsibility for the state of industry and for social dislocation, it was the duty of the Government, on the appearance of that Royal Commission's Report, to insist upon its recommendations being carried into effect. The fact that the owners and the men were not disposed to accept those recommendations in toto did not relieve the Government from their responsibility, and, therefore, if the whole cause of the financial position in which the Chancellor of the Exchequer now finds himself were the coal stoppage, the responsibility for that financial position still rests upon the Government.
The right hon. Gentleman, in the early part of his speech yesterday, by way of anticipation of criticism which he expected in the course of our debates, referred to the aim, I think he called it, or the promise as I have sometimes called it, made in his first speech to reduce national expenditure by £15,000,000 a year.

HON. MEMBERS: £10,000,000.!

The CHANCELLOR of the EXCHEQUER (Mr. Churchill): £10,000,000.

Mr. SNOWDEN: £15,000,000 a year. Hon. Members on the other side of the House, in spite of the prominence that
has been given to that declaration, are still not familiar with its terms. The Chancellor of the Exchequer aimed, shall I say, at an annual reduction of £10,000,000 in Supply expenditure, and—this was no aim; this was a definite purpose—there would certainly be a saving of about £5,000,000 on Debt Services each year. Two years have gone by, and there has been no reduction on the Supply Services and an increase last year of nearly £20,000,000 upon the Debt Services. The right hon. Gentleman yesterday contrasted his estimated expenditure this year with the actual expenditure in the year in which I was in office. I would remind the right hon. Gentleman that I was not in office during the whole of that financial year, and I would remind him, also, that the Estimates were Estimates which had been inherited, although we did succeed, in the very short time between our entering upon office and the presentation of the Estimates to the House of Commons, in making considerable reductions. We cannot compare actual expenditure with Estimates, such as the right hon. Gentleman submitted to the House yesterday. Therefore, I must take Estimates. In the year before the right hon. Gentleman presented his first Budget the total Estimate was £790,000,000. He submitted to the House yesterday a total estimated expenditure for this year of over £833,000,000. If he had succeeded in achieving his aim of a reduction of £15,000,000 a year, what would have been the position? The Estimates are £43,000,000 more than the Estimates of the year before he took office, and, if his aim had been realised, instead of submitting to the House yesterday an Estimate of £833,000,000, his Estimate would have been £745,000,000, or nearly £100,000,000 less. I can say nothing which would illustrate the failure of the right hon. Gentleman's aim to reduce the national expenditure more than the mention of that figure. But still the right hon. Gentleman is hopeful. Hope of economy springs eternal in his breast. He told us a year ago that he was
authorised by the Prime Minister to say that the Cabinet Committee on Economy would pursue its work unceasingly, thus inculcating upon all Departments … of the Public Service the extreme importance of saving money in every possible way."— [OFFICIAL REPORT, 26th April, 1926; col. 1695, Vol. 194.]
and you have the result of all these efforts, these unceasing efforts, on the part of the Cabinet at the inculcation of economy upon the public Departments in an Estimate of £833,000,000. The right hon. Gentleman is still hopeful, but the Cabinet have given up all hope of being able to effect a reduction of expenditure. Economy was not even mentioned in the King's Speech. The right hon. Gentleman excuses himself to some extent by saying that as the population grows certain increases of expenditure are in a sense inevitable. When did he discover that? Was he ignorant of that fact when he expressed his aim two years ago? Either he must have been ignorant, or he must have known that these automatic increases of expenditure would continue year after year. May I say this, in order to make our position perfectly clear, that I am dealing now, not with the abstract or practical question of national economy; I am dealing with the right hon. Gentleman's declarations and with his failure to accomplish the aim that he set forth. We do not deplore many of these automatic increases of expenditure. We are glad that we are responsible for some of them, and we shall never be parsimonious in restricting the national expenditure of a remunerative kind, because we hold that the most economical way in which money can be spent is to spend it collectively, and by spending money collectively you get a greater economy than when the money is spent individually. The right hon. Gentleman is in need of friends and supporters, and a day or two ago he received a testimonial from Lord Birkenhead on the stupendous efforts he put forward this year to reduce national expenditure. Lord Birkenhead said:
I can assure you of this, that no Chancellor in all the years I have been in politics, has ever laboured more in the cause of economy than Mr. Churchill.
He paid him that compliment. I wonder if Lord Birkenhead thought in making that statement that he was paying a compliment to the right hon. Gentleman because if no Chancellor ever laboured more, no Chancellor has ever been such a ghastly failure in achieving anything. What the Cabinet Committee engaging unceasingly on this economy campaign has been unable to accomplish, the stunt newspapers have forced the Government to do. The first step has been taken in national economy in
Parliament, and three Ministries are to be abolished. With an expenditure of £833,000,000 three Ministries are to be abolished, saving, perhaps, £10,000 a year. Those who have been carrying on the campaign for the abolition of these Ministries do not appear to know that though the Ministries may go, the work of the Department will still have to be carried on. Why is it that Hon. Members opposite have suddenly become interested in this question of national economy? [Interruption.] Do hon. Members mean to say that for some years back they have been taking an interest in this question? [HON. MEMBERS: "Yes!"] Then I compliment them upon their success and upon the influence which they have been able to bring to bear on that policy.
There were some other proposals emanating from hon. Members opposite besides the abolition of the three Ministries. There is another proposal that, by way of an example in national economy, hon. Members of this House should submit to a reduction of 25 per cent. in their allowance, and, ironically, that Motion is sponsored by a millionaire Member of this House, an action which can only be stigmatised as mean and contemptible. Let me go a little more into detail in regard to the expenditure of' this year. For the interest on the National Debt the Chancellor of the Exchequer is setting down £304,000,000. The whole of the supply services upon which the £10,000,000 a year deduction depends is £420,000,000 this year as compared with £402,000,000 three years ago. There is one observation made by the Chancellor of the Exchequer yesterday which I regret he did not go into more elaborately, and that is that he is making no provision for Supplementary Estimates. I remember when the present Prime Minister was Chancellor of the Exchequer he stated in his Budget speech that he was making no provision for Supplementary Estimates because he said he would be able to meet the cost, of all Supplementary Estimates out of savings which would be affected during the year, but he did not, and where the Prime Minister failed the present Chancellor of the Exchequer is not likely to succeed.
Is there any economy man on the opposite side of the House who believes for a single moment that the estimated expenditure of £833,000,000 will not be considerably increased by Supplementary Estimates, and will be considerably higher at the end of the year? I do not believe there is one. If it does happen it will be the first time in the history of the House of Commons when Supplementary Estimates have not been submitted to it, in my time at any rate. Take the Navy Vote. The cut in the Navy Vote was grotesque and ludicrous, and it was perfectly obvious what had happened. The Chancellor of the Exchequer had said to the Admiralty: "I really cannot present or agree to Navy Estimates in excess of the previous year. You must make them a little lower," and on a £58,000,000 estimate they made a reduction of £100,000. The First Lord of the Admiralty, in his Memorandum on the Navy Estimates this year, said that he had
to discount in advance possible delays in the progress of such work. I must point out, however, that any forecast of this kind must be attended with great uncertainty, and must carry with it the possibility of a Supplementary Estimate, if the delays do not, in fact, occur.
Anticipating possibilities which are not likely to accrue! We have a similar statement in the Memorandum of the Air Ministry warning us that if there had been a reduction this year it must not be taken as an indication that there would be a reduction in expenditure in that branch of the Service next year, and he said that expenditure will almost certainly increase in years to come, and he gave reasons for it. Therefore I think we are justified in assuming as a certainty that the estimate of £833,000,000 of expenditure will be exceeded during the year.
Now let me turn to the revenue. After the compliment the right hon. Gentleman paid to me yesterday as to my prescience in estimating the yield of certain taxes during the present year, I am encouraged to hope that the figures I am now going to submit may prove to be as accurate in their forecast. The right hon. Gentleman assumed that the fall in the yield of the Income Tax last year was due wholly to the coal dispute.

Mr. CHURCHILL: No!

Mr. SNOWDEN: The right hon. Gentleman pointed out how much had been lost. If the right hon. Gentleman can remember he will know that upon the last two Budget Debates I have emphasised that the penny yield in the Income Tax appeared to have reached the peak point of expansion, and that it would not be safe in the years immediately in front of us to estimate upon an increased yield from the Income Tax. The figures last year bore out my prophecy. They do the same to a great extent this year. It is interesting in this connection to know that the last two years have been the only two years with one exception—and then there were special reasons—during the last 14 years when there has not been an increased yield on each penny in the £ of Income Tax. The right hon. Gentleman said that I was within £2,000,000 of the estimate of his expert advisers, but I also added that I thought that was a maximum figure, and I shall not be at all surprised if the Income Tax this year fails to respond to that expectation. If we are to believe everything in the gloomy picture which the Chancellor of the Exchequer drew yesterday as to the effect of the industrial dislocation of last year, those profits on which Schedule D will be estimated coming into this year's revenue will be considerably less than the average of previous years. The right hon. Gentleman has estimated for a little less this year in regard to excess profits. There is something very extraordinary about them, and they seem to be endowed with eternal life. They were regarded as dead beyond the hope of all resurrection two or three years ago. The same applies to the Corporation Profits Tax and the right hon. Gentleman is still hoping that some revenue from these two taxes will come to his aid during the present year. In regard to Customs and Excise, we have had an illustration of the inaccuracy of many of the right hon. Gentleman's estimates, in the experience of the Betting Duty which, during the five months it has been in operation, has only realised about half the estimate. His estimates err on the side of optimism. I shall be very much surprised if there is no grave industrial dislocation, towards which the Government, by their Trade Union Bill, seem to be moving. An improvement in trade, as compared with last year will not benefit the right hon. Gentleman very much, though it may
benefit him next year. Therefore, I conclude my observations upon the estimates of expenditure and the estimates of income by saying that I believe the estimate of expenditure is too low, and that the estimate of revenue is too high; and I think it is extremely likely, if no unforeseen event happens, that next year the Chancellor of the Exchequer will find himself in the unenviable position, for a third year in succession, of having to face the House of Commons with at least a fairly considerable deficit.
Now I want to turn to the very important question of the Sinking Fund. The Chancellor of the Exchequer hinted yesterday at what some hon. Members state more definitely, namely, that the £50,000,000 statutory Sinking Fund, when provided, is really a surplus income—that it is a saving. It is no such thing. There is hardly an obligation in our national expenditure which is more obligatory than the payment of the £50,000,000 a year Sinking Fund. It is a statutory payment; it could not be changed without an alteration of an Act of Parliament. That is not so with a great deal of our expenditure. There is no Act of Parliament saying that so many millions shall be spent upon the Navy, or the Air Force, or the Army. Parliament each year decides what the sum allocated to these Services should be, and it is not in accordance with the facts to regard a statutory payment of £50,000,000 a year as being a saving. Last year, if I remember aright, the right hon. Gentleman when he had his deficit of £14,000,000, actually said that on the facts of the case he had a surplus of £36,000,000. I am not going to weary the Committee by quoting what the Prime Minister and the Chancellor of the Exchequer have said in regard to the importance of debt reduction, beyond this. There is one sentence in a long statement by the Prime Minister when he was Chancellor of the Exchequer, which is very pertinent to the present discussion. He said:
We may suggest borrowing for one year, but to suggest it for two successive years would be a serious blow to our credit.
That is precisely what the right hon. Gentleman is doing; he is borrowing for the second year in succession. He said last year:
Whatever saving we may be able to make in Supply Services, the time will come
when it will be on debt that the big savings for the future will have to be found. I firmly believe that, unless we take proper steps to deal with our debt in time, we may find it an intolerable burden. I therefore attach the greatest importance to a steady reduction of debt from revenue. I do not believe we can re-borrow satisfactorily unless we aid our credit by an avowed and sustained programme of debt reduction from revenue. I have taken every step which prudence and foresight could take to prepare the way for my successor who will have to deal with these great conversions.
May Heaven help his successor! The right hon. Gentleman met two deputations just a month ago, and one if not both of them, urged on him the policy of borrowing. Nothing could have been more orthodox than the reply of the right hon. Gentleman. He told the first deputation that to maintain the Sinking Fund would save interest on debt, improve national credit, render funding operations easier, facilitate trade by reducing the costs of capital and—and this will interest my hon. Friends behind me—render higher wages possible. That was part of his argument a month ago in opposition to a demand for a raid on the Sinking Fund. He said that, as they had urged a policy of borrowing, he felt bound to point out that this was not the time to weaken and dissipate the national credit, strained as it had been by the events of the last 10 or 12 years. Every form of borrowing impaired the national credit. Why, then, has the right hon. Gentleman borrowed in order to make up the deficit on the last year's Revenue accounts? There is no answer. [Interruption]. The right hon. Gentleman does not understand. He will understand; the explanation is coming in a moment; but the fact that the right hon. Gentleman does not at once realise what I am driving at shows how little he understands what he has been doing. The statutory Sinking Fund is £50,000,000, and it is admittedly too little. It was admitted to be too little by the present Foreign Secretary when he was Chancellor of the Exchequer; it was admitted to be too little by the right hon. Gentleman the Member for Hillhead (Sir R. Horne); and they suggested an annual Sinking Fund of £100,000,000 a year. The Colwyn Committee, too, writes strongly upon this point. They urge that as quickly as possible the statutory Sinking Fund should be raised to £75,000,000 out of revenue, and as quickly as possible after that to £100,000,000 a year. It is
important in this connection to remember that we are now compelled to provide a Sinking Fund of £51,000,000 a year to meet the specific commitments upon loans to which a specific sinking fund is attached—£51,000,000 a year, including the £10,000,000 on the last Conversion. What will be the effect? The right hon. Gentleman spoke yesterday, and gave some figures, regarding debt reduction, but he did not tell us that the reduction to which he referred had been made out of huge Budget surpluses, and not by the application of an annual statutory Sinking Fund. The Colwyn Committee give one or two very interesting and significant figures bearing on that point. In 1920 the debt was £7,831,000,000. At the end of last year—the figures are given in the White Paper published to-day—the debt was £7,554,000,000, or a reduction of £227,000,000. But in one year during that period over £200,000,000 of Budget surplus was allocated to debt reduction. Payments through the Sinking Fund have made no impression at all yet upon the aggregate total of the War debt. Since 1920, debt has been cancelled to the extent of £1,583,000,000, but debt has been created to the extent of £1,867,000,000, and, therefore, during the last six years, there has been an increase in debt of £284,000,000. With regard to interest charges, the right hon. Gentleman yesterday gave us a most alluring picture of the possibility of huge debt reduction by a fall in the rate of interest, and by taking advantage of that by means of conversions. All that has happened, say the Colwyn Committee, in the way of interest charge reduction during these six years, has been £1,191,000 a year. But something else has happened. The debt in 1920 was £7,831,000,000, but the burden of that debt on the country is 61 per cent. higher than it was in 1920, through the appreciation in the value of money.
Now I come to the point on which the Chancellor of the Exchequer really needs a little enlightenment. Last year he had a deficit of £14,000,000, and this year he has a deficit of £36,500,000. That is a total of £50,500,000. Last year he added £10,000,000 to the statutory Sinking Fund, and this year he proposes to acid £15,000,000. That is £25,000,000 for these statutory payments. £50,000,000 has been
added to the debt, and £25,000,000 has been taken off, and, therefore, the Chancellor of the Exchequer has during the last 12 months raided the Sinking Fund to the extent of £25,000,000. If time permitted, I would like to go back and re-read some of the extracts from his speeches about the importance of maintaining the national credit.
Now I want very briefly to turn to what the right hon. Gentleman has done with regard to Conversion. In October last year, 5 per cent. Treasury Bonds were converted in 4½ per cent. Stock, a comparatively short-term security, repayable at option in February, 1929—about two years from now—or in 1934. The bulk of those Treasury Bonds it is important to remember, are held by banks and big financial houses, and it is a very great advantage to them to hold a short-term stock paying good interest. When a conversion takes place, as in this case last October, these banks and financial houses are enabled to claim the brokerage commission at 5s. per cent., and that, of course, must be included in calculating the yield upon the stock. They got a cash payment of £1, and, that with broker's commission gives them, if the option be exercised at the end of two years, an annual interest rate of £5 2s. 6d. The right hon. Gentleman converted 5 per cent. Treasury Bonds into bonds, which could be redeemed in two years' time, carrying meanwhile an annual interest of £5 2s. 6d. By conversion operations of that character, when, may I ask, is the interest upon the National Debt going to be relieved? Take the right hon. Gentleman s latest conversion in January to the new 4 per cent. Consols. Holders of £100 Treasury Bonds get £117 15s. of the new stock; holders of 5 per cent. National War Bonds get £124 5s. of the new bonds, giving a yield on the original £100 of £4 19s. 5d. secured for 30 years. The Chancellor of the Exchequer will be a very fortunate man if, 30 years hence, he is able to congratulate himself that he was a good prophet when he said that the rate of national borrowing might fall to 3 or 3½ per cent. But, however it falls, in the meantime he has committed the country to the payment of a rate of interest of
£4 19s. 5d. on the converted National War Bonds for a period of 30 years.
Now there is a very peculiar advantage or attraction—"stunt," I believe some vulgar people would call it—attached to this conversion—a guarantee that £10,000,000 a year will be allocated specifically to the redemption of this stock. There might have been only £10,000,000 converted; still the £10,000,000 Sinking Fund would have had to be provided. It came out at about £200,000,000, and, therefore, those Consols carry a Sinking Fund at the rate of 5 per cent. The weight of Sinking Fund on the whole Debt is only 65 per cent. It is only to be imagined, when this great attraction was attached to the conversion last January, in the state of the Money Market to which he has contributed so much—

Mr. CHURCHILL: The Labour party.

Mr. SNOWDEN: I will come to what the Labour party did in the last conversion. The new Consols will pay upon the actual sum invested £4 14s. 3d. interest, and upon redemption there will undoubtedly be a capital appreciation, because a public loan to which a substantial Sinking Fund is attached, and especially one of this dimension, is bound to appreciate as the date of maturing comes near. The right hon. Gentleman said something about the Labour party just now. I made one conversion shortly after we came into office, I converted at an interest of £4 12s. Surely, in three years, with wise financial management, there ought to have been an improvement in national credit. What has happened? Three years later he can only convert at £4 14s. 3d., and six months ago he actually converted at over 5 per cent. That is something of the financial record of the right hon. Gentleman. He has during three Budgets relieved direct taxation to the extent of £50,000,000 a year. He has increased indirect taxation by £25,000,000 a year. In each of his three Budgets he has added considerably to indirect taxation. He has always been regardful of those whom in his first Budget, he described as his hard-pressed friends the Super-tax payers.
What has been the effect of the right hon. Gentleman's policy on national credit? The Bank Rate has been raised from 4 to 5 per cent. Will the right hon.
Gentleman kindly interject "Labour party" again? The Treasury Bill rate, when the Labour party was in office, averaged £3 7s. 11d. Last year the average was £4 8s. 6d. In 1924 the Labour party again—the 5 per cent. War Loan averaged during the year 103, though it was expected to go down to zero when a Labour Government were in office. Instead of that, it went up to 103, and is standing to-day at 102, and the capital loss during the right hon. Gentleman's tenure of office has been about £20,000,000 on this stock. In 1924, Consols stood at 58⅞. Now they are at 54. They have gone down five points under the right hon. Gentleman's administration. That involves a capital loss of £34,000,000 on those two stocks. I wish hon. Members opposite would take a wider view of the consequent implications and results of the Government's national policy. They are paying not merely in relation to the Income Tax: they are paying in fifty other ways for the luxury of the right hon. Gentleman as Chancellor of the Exchequer. If they would look into these matters, they would find that his scintillating entertainments in the House of Commons are no compensation for his cost to the country.
I want to say a word or two about the financial proposals in this Budget. I have described it as ludicrous, but, really, though I thought I knew the right hon. Gentleman, I could not have believed, had I not been told before by one of the newspapers which appears to be his friend, that he proposed to pursue—the right hon. Gentleman will recognise the words—the policy of robbery and spoliation that he began last year in his raid upon the Road Fund, unemployment, National Insurance and the like. His proposal to clear out the Road Fund altogether is really a serious matter. Motor traffic is increasing every day. The toll of accidents, owing to a great extent to the inadequacy of our roads, is increasing every year. There is not a town, village or city in the country where important road improvements are not urgently required. Expenditure upon roads is different from expenditure upon battleships. It is remunerative. It pays its way, and, indirectly, it is one of the greatest aids to the encouragement of trade. At a time like this, the Chancellor of the Exchequer, in order
temporarily to relieve his financial embarrassment, steals the whole of the Road Fund which had been accumulated. Mark you, he has taken something which is already hypothecated. Every penny of that £7,000,000 he took last year; every penny of this £12,000,000 is already pledged for schemes to which the Ministry of Transport had, at any rate, given their support until the Chancellor of the Exchequer imposed his veto.
I am quite sure that of all the proposals in the Budget, none excite more influential opposition than this proposal to clear out the Road Fund. What does it mean? The result will be just what followed his raid upon National Health Insurance, unemployment and the like. It will mean an increase in local rates, provided the local authorities are determined to keep up the standard of their road equipment. If they do not do that, it will mean a loss of efficiency. I can assure the right hon. Gentleman he will meet with the most strenuous opposition to this proposal in the later stages of the Budget. Of course he can afford to laugh with what I have often described as his servile hordes behind him, but who, however much they disagree with him, will, at any rate, obey the party Whip and follow him into the Lobby.
5.0 p.m.
Just one word in regard to the new duties on pottery. Now there is a great constitutional principle involved here. The honour of the pledge of the Prime Minister is involved once more. The Prime Minister told us at the General Election that there would be no Protection except for an industry which had run the gauntlet of a Committee set up under the Safeguarding of Industries procedure, and that that would be the procedure, the Parliamentary procedure, for the imposition of a tariff. But the Chancellor of the Exchequer comes along and tells us that some Committee has been inquiring into this matter and, by a majority of one, has recommended that a duty should be put, upon this pottery. We know that one. Surely, it is the business of the President of the Board of Trade to deal with this matter. If the Committee had recommended the imposition of a duty, and if the President of the Board of Trade approved that recommendation, then it was the duty of the President of the Board of Trade to put on that tax, not the Chancellor of the Exchequer. But
the Chancellor of the Exchequer planked this duty into his Budget, and it is to come into operation in a week, and during five days of that week the House of Commons will not be sitting. [Interruption.] The cheers from the other side of the Committee show what the constitutional party think of unconstitutional acts. They are prepared to abandon all principle, all constitutional practice, provided that they can do something which is calculated to carry out their policy.
Now let me refer to the changes by which the Chancellor of the Exchequer hopes to get £14,000,000 or £15,000,000 by an alteration in the payment of Income Tax under Schedule A. From the manner in which that has been received in some quarters, one would imagine that this sum was a windfall; that it was something that was coming from nowhere, and that nobody was going to provide it. But it comes to this: that those who pay Income Tax under Schedule A will pay three times in 12 months instead of twice. Therefore, the Chancellor of the Exchequer has placed upon this special class of Income Tax payers an additional burden this year of between £14,000,000 and £15,000,000. That is what he has done. But there is also another point which has arisen on this matter. The right hon. Gentleman is not going to hit the property owners only, but he is also going to hit the tenants. The Committee will remember, as the Chancellor of the Exchequer pointed out, that in the very nature of our Income Tax law the tenant of a house must pay the landlord's assessment, under Schedule A and then deduct it from the rent. Now what happens? Under the present system, the half-yearly payment is paid in January and in July. The rent quarter days are in December and the end of June. The tenant pays his rent at the end of December. He has to pay Income Tax in January, and, because his quarter's rent is not due until the end of March, he therefore has to be out of pocket for two months before he can deduct the Income Tax from his rent. So that it is not merely the property owners who are going to lose the interest, but it is the tenants who are going to lose the interest too.
I will not at this stage say anything about the other taxes that are proposed. The Tobacco Duties, the duty on matches and the like are all worthy of the right hon. Gentleman. A moment
or two back I was saying something about the record of the right hon. Gentleman and the effect of his policy upon the finances of the country, and I said that it was quite beyond me to do justice to the genius of the right hon. Gentleman. Therefore, I fall back once more on his own words, and upon his own description of his Budget:
My Budget is the most delightful hamper, the most overflowing cornucopia of luxuries, the most delectable and carefully-chosen repast that ever was laid upon the table of a nation by a British administration.

Mr. CHURCHILL: Where did you get that?

Mr. SNOWDEN: That was in the right hon. Gentleman's own speech.

Mr. CHURCHILL: When?

Mr. SNOWDEN: The right hon. Gentleman will remember that I quoted that last year, and I am quite sure that he will not for one moment deny that those words are equally applicable to his present Budget. The right hon. Gentleman will not surely say that he has fallen off in the provision of all these luxuries during the last two years. The right hon. Gentleman is a sort of combination of Mark Tapley and Mr. Micawber. Mark Tapley was described as a high-spirited man who was determined to come up jolly out of the most unfavourable circumstances, and Mr. Micawber was described as a most unpractical man, a great speechifier, and a voluminous writer, a promoter of bubble schemes, always believing that he would succeed but never succeeding. Two years ago, I described the right hon. Gentleman's Budget as "a rich man's Budget." A year ago I described his Budget as "the Budget of a profligate and a bankrupt." This year's Budget is a combination of both, with jugglery and deceit added.

Mr. HILTON YOUNG: The right hon. Gentleman the Member for Colne Valley (Mr. Snowden) has made a very good Conservative speech. The only thing which I find to quarrel with in the Conservatism of his speech is that it is almost too hidebound and pedantic. Of course, the speech of the right hon. Gentleman was enlivened by a certain amount of Parliamentary vituperation, which is always necessary in order to keep up the spirits of one's followers,
but I thought that I observed in the attitude of the right hon. Gentleman a certain sense of oblivion as to his own position. I suppose that naturally, he expects one day to fill once more the position which he has already filled with distinction that of Chancellor of the Exchequer in a Labour Ministry. Does he really suppose that he can fill that position again for two years and come to that Box with his third Budget, having to provide for an expenditure of £820,000,000 only, as the right hon. Gentleman says, the Socialist party, whenever they come into power, with their present tenets, will not be parsimonious. The right hon. Gentleman will not have to budget for £820,000,000 but for £1,000,000,000. [Interruption.] "Heaven help the successor of the Chancellor of the Exchequer," said the right hon. Gentleman. As a cordial well-wisher of the right hon. Gentleman the Member for Colne Valley I say, "Heaven help the right hon. Gentleman the Member for Colne Valley if he is the successor of the present Chancellor of the Exchequer." I believe him to be a cordial good friend of economy, and I know that his aspirations in that direction will he doomed to the most bitter disappointment under the régime with which he will be Connected.
But I do the right hon. Gentleman an injustice. There was one ground of solid criticism in his speech; but in fact he chose for criticism that particular in which it would appear that the present Budget should really receive most commendation. The principal feature of our present condition is that we are in difficulties, and that those difficulties are of a purely temporary nature. The right hon. Gentleman the Member for Colne Valley spent a good deal of time in debating what the cause of those difficulties was. I will not follow him. It must seem to a plain man quite obvious that the principal cause of the failure of the revenue from Income Tax was the stoppage in the coal trade and the great industrial troubles of last year. The coincidence is too striking not to convince one of that The chief factor that caused trouble in the last year in increased expenditure was the dearness of money. That, too, to a business man, is directly attributable to the industrial trouble and to no other cause. The
efforts of the right hon. Gentleman the Member for Colne Valley to ascribe them to any other cause are an instance of that curious facility of Members opposite in writing history ad hoc. In our temporary difficulties the most commendable point of this Budget is that it does not set out to make any permanent change in our financial structure, but that it adopts the prudent and temporary expedient of patching up; a patch is put on to cover the gap.
I applaud the expedient of finding revenue for this year without any alteration in the permanent structure of the finance of the country. Take the money borrowed from the Road Fund. The simple answer to the strictures that have been passed by the right hon. Gentleman the Member for Colne Valley is that, in consequence of that borrowing, not one single penny less will be spent upon the roads. The criticisms as to the money borrowed from the brewers' credit and from Schedule A of the Income Tax are equally simple of answer. The answer is that no doubt it necessitates a little more working capital running into the businesses concerned. But that is simply a withdrawal of a privilege which was before granted. What is being taken back now is something which was gained by the persons affected when the extension of credit and the extension of time were first given. I would not applaud these expedients in an ordinary year, but I applaud them this year as the best way of covering a temporary though a great difficulty.
Now we come to the question of the Sinking Fund, and this is a more debatable matter. There I find myself, unfortunately, differing from the right hon. Gentleman on the ground I have referred to, that I find his Conservativism too hide bound and pedantic. He appears to me to have been at great pains to make and erect a bogey. The bogey was this. "The present Chancellor is borrowing to meet current expenses." It is not so. He is not borrowing to meet current expenses in the sense in which that is a blameworthy thing to do. There has been borrowing to meet the Statutory Sinking Funds. There has been borrowing, but it was borrowing to pay off debt. But why is that necessary? Because of what has always seemed to me the mistaken policy of creating Sinking Funds
pigeon-holed and attached by Statute to particular loans. That makes it impossible that you should not borrow for debt payment when you have not got money enough from revenue sources. But the blame there is not the blame of this Chancellor or the Chancellor of any other year in which revenue has not come up to the statutory figure of the Sinking Fund. The blame is in the policy which originally made these Sinking Funds pigeon-holed and statutorily attached to particular loans. One must not blink the fact that the so-called deficit of this year is not a deficit in the discreditable sense in which a bankrupt has a deficit. It is not a deficit in the ordinary commercial sense of the word. It is only that we did not succeed in paying off as much debt as we determined to pay off.
I come to another aspect of the matter. Is it a wise thing in the course of a year which is going to be very difficult—a bad fiscal year—to pile this additional burden of £15,000,000 on to the Sinking Fund? I do not think it is. I think the Chancellor would have been wiser to have waited. The right thing would have been simply to keep up that good habit of a £50,000,000 Sinking Fund. What is important in a sinking fund is that you should stick to a habit, that you should repeat the amount of £50,000,000 year after year until it becomes automatic. If you get behind hand in one year, it may be a good thing to make it up some other year, but is it not common-sense to wait for a good year to make it up? It appears to me that this year the Chancellor is asking us to undertake a task which would be almost impossible to ask the nation to undertake when it, is in full health and asking it to do that in a year in which it is not very well. That is not reasonable. After all, if there is to be, absolute sacrosanctity about putting accurately £50,000,000 to the Sinking Fund every year on an average, there have been years in the past when we have put very much more than £50,000,000 to the Sinking Fund. The average for that range of years would be above £50,000,000. We have acquired merit to draw upon from the past. The question is whether the Chancellor has not been in too much of a hurry this year and whether making up lost ground might not be better left to next year.
I know it may be said this year may not turn out as you hope. There will he Supplementary Estimates to come. It may be said that you must not take the Sinking Fund of £65,000,000 too seriously, that we shall have a deficit again at the end of the year, and find that we have not really paid off £65,000,000. That would be a bad thing. It would be much better to make up our minds to £50,000,000 and to pull it off, than to raise our ambitions to £65,000,000 and not pull it off. The question is whether the policy for the future should not be to keep to the £50,000,000, and, if arrears accumulate, to leave it until promise of a real boom year before we set out to work off arrears.
It has been an extremely ingenious Budget. The methods by which the gap has been covered have earned common commendation for their ingenuity. That ingenuity gave the impression of very great ease in the Budget this year. It is a danger that that ease may produce a certain false impression in the public mind. The fact remains that we have to show this year, as we did last, a Budget of £835,000,000, and that that is a Budget which is too big for this country to bear. Let us fix our minds, not upon the amazing facility with which we got over the trouble of last year, but on a longer view of the course of our national expenditure. Last year we spent £16,000,000 more than in the year before. This year we are budgeting for an increase of £38,000,000 in comparison with the Estimates of last year. This is the slip, slip, slip down the slope of expenditure. We are getting fatally used to the idea that there is to be a normal increase in expenditure year after year. It needs a hearty shock to enable us to shake off that bad habit. It is essential that we should shake it off. The Chancellor gave us good hope on one ground. He told us that next year the normal reduction of expenditure will for the first time out-balance the normal increase.

Mr. CHURCHILL: Apart from the beneficial or remunerative increase of the Post Office and the Road Fund, I excluded them. I do not know whether the right hon. Gentleman excludes them?

Mr. YOUNG: Apart from the increase of expenditure upon the self-supporting Departments. That is so. It was my
error to omit that reservation; but there was another reservation I had not forgotten, that this is only to be so if no new big schemes of expenditure are embarked upon. That is the point on which we should concentrate our minds. We can have no confidence, from the course of events of recent years, that this big "if" will be answered by facts which are in accordance with the hopes of economists. So we come to this state of affairs, that we have still to proclaim the fact that the country is labouring under a burden of taxation which is intolerable. It is intolerable, because it is doing the country harm; it is driving the country down. No country can afford year after year to go on devoting, as we are devoting, 20 per cent. of its taxable income to taxation, without feeling the most deep-seated and most profound ill effects upon its national vitality.
We know that an eminent Committee, the Colwyn Committee, has lately sat and made certain recommendations. The arguments and recommendations of that Committee are being used as if they were an authority for this proposition, that taxation does the country no harm. Of course, there is nothing in the utterances of such responsible men which could possibly give authority for that proposition. But they do seem to argue that Income Tax on the present level is not bad for trade, a contention which my common sense approaches with distrust, and in which, if I succeed in detecting an error, I shall feel a sense of relief. Nonsense is nonsense in spite of economic science. What is the error? Is it not this? The argument is quite sound as far as it goes, that you cannot put Income Tax on to the price of articles which have a competitive price. Because you cannot raise the competitive price, you cannot put the Income Tax on to their cost to the consumer. These distinguished economists argue therefore that Income Tax is not bad for competitive trade. That is certainly a partial view of the position. If you cannot put the Income Tax on to the cost, why, none the less, but all the more, you have to take it off your profits. That is where the harm comes home to roost. You come back to this principle which is what we all feel in our bones about the evil of the present big taxation of the
country. The effort of men is in proportion to their reward. The reward of effort in this country is artificially reduced by the high cost of government to a degree that results in slackness, in lethargy, in lack of initiative and of healthily speculative enterprise all over the country. That is the specific disorder from which this country is suffering, in the experience of practical men. There is really no difference about it.
Let me turn from argument, and consider the remedy. It is no good to continue to vaticinate about these evils without thinking of their remedies. Is there no remedy? The expenditure of the country is going on mounting up, and mounting up. Everybody wants to stop it. The taxpayer want to stop it; Members of this House want to stop it; the Government most cordially want to stop it; I believe civil servants in the spending Departments, loyal, assiduous and public-spirited men, want to stop the increase of expenditure too: and nobody can do it. Still expenditure goes on like a car of Juggernaut that gathers momentum and is out of control of the people who made it. What is the reason? The first reason is, the mere size of Government in modern times. We have built this car of modern Government, and it is so big that it is almost out of the control of the puny men who made it. But there are other causes. What is the direction in which we must seek the path of economy? There are two paths down which you can walk. You can walk down the path of reducing the cost of excessive Services by getting more efficient and economic administration. What is needed for that is knowledge. Anyone who has not got knowledge of the administration in question will not be able to reduce its cost. The second path of economy is actually to reduce the Services as a whole. This does not want so much knowledge. Almost any fool can do it. What is wanted is authority and power.
What are the machines which we have available to help us in the pursuit of economy? First of all, let me mention a most admirable body which works away year in and year out, that is the Public Accounts Committee. I mention that because it illustrates the argument. The Public Accounts Committee does very good work for economy. What helps it to do so are these circumstances. It has
at its disposal public officials of high standing, the Auditor-General and his numerous staff. They are actually in the spending Departments day by day in close touch with and with intimate knowledge of what is going on. Those are two great qualifications for good work. But why cannot more be done by the Committee? For equally obvious reasons. First of all, because their chief task is not the audit for economy; it is the audit for regularity—quite a different thing. In the second place, because their inquest is post-mortem; and, in the third place, because they have no executive power over policy at all. A post-mortem inquest cannot have.
Then we come to another body equally deserving of praise, and that is the Estimates Committee, which works hard year in and year out. If they do such good work, as they do, it appears to me it must be due to the great devotion and assiduity and knowledge of the members, because for the work the body has to do it seems to lack every sort and kind of necessary apparatus. Its inquiry is practically post-mortem; it gets the Estimates when they are already made up. It has no staff which can inquire into the Estimates during their formation. Therefore, this Committee cannot have the essential knowledge; and, further, of course, they have no power over policy. It has neither the essential means of getting knowledge, nor the essential power, to economise. Why, it may be said, not make this Committee more powerful by giving it a staff to inquire into the Estimates during their formation on the model of the Auditor-General's staff? That is an attractive proposition; but I do not think it is possible. What would result if you had the staff of an Estimates Committee sitting in the offices while the Estimates were being prepared? It would have this result, that the Committee would then, in effect, share responsibility for the Estimates with the Departments and the Executive. In fact, you would be putting administration into commission between the Government and the Estimates Committee. That would be a very mistaken thing to do from the point of view of good government. Next, we come to this House itself. It has the power to economise, but sometimes it has not the will and never the knowledge. It might
possibly have the knowledge at second hand, through its Committees. We have seen the difficulties and limitations on that possibility. One is forced to the conclusion that if we look to the House of Commons for economy we are barking up the wrong tree. The House of Commons is a legislative and not an executive body. Ultimately, the task of economising must be the task of the Executive. Let us look at the Executive organisation. Take the great financial staffs in the spending Departments. In well-organised Departments those staffs are doing invaluable work for economy, working on the living body of the Estimates before they are actually fixed, and not post-mortem, working with intimate knowledge and with sympathy with the actual spenders, which is the most efficient of all means of check and control. What is the limit of their power? They have no real authority. Their authority is no greater in each Department than that of the Minister. The strength of the Finance Department of an office like the Admiralty or the War Office is the length of the Minister's foot. You must look to the Minister and the Cabinet. There, alone, can you find the force that can bring the work done for economy in the finance Departments of the great spending Departments to fruition.
Next you come to the Treasury—the ablest, most strongly organised, and finest weapon for economy in the Civil Services of the world—a most wonderful force. They have more profound knowledge and a better will to use it than any other finance Department probably that has ever been known in history. What is the limitation there? Again, it is the limitation of power. The Treasury has no more power than the Chancellor of the Exchequer; it has no more power than the Cabinet will allow it. The use of all weapons and machinery for economy on the Executive side is simply and solely dependent upon the Cabinet and the Cabinet alone. When we come to the Cabinet, we come to the only real power for economy in the country. The Cabinet alone has both the knowledge, through the Civil Service, and the power, through the control of the House of Commons, to be an efficient force for economy. If we expect economy from any other power, from any other force, or any other assembly in the country, we
shall be making a mistake. Then why does not the Cabinet economise? What is the answer to that question? It seems to be powerless to economise. The simple answer is, that it is because of its size. We know that economy breaks down generally for this reason, because everybody is enthusiastic for economy in general, but nobody will support it in particular. As one who has not been a Cabinet Minister, it cannot be said that I am giving away any Cabinet secrets if I suggest that the reason why economy breaks down in the Cabinet is because, although everybody there wants to pursue economy in general, each Minister resists it in his own Department. So it must be, if you have all the Ministers of the Spending Departments in the
Cabinet. That is a natural stumbling block in the way of economy.
Some people recommend the reinstitution of an outside inquiry or authority, like the Geddes' Committee. The story of the Geddes' Committee is well worth attention. That Committee, in the end, did deliver the goods. It did it because of several reasons. In the first place, because it was a small, vigorous body; secondly, because none of the spenders sat upon it; thirdly, because it had full knowledge at its service; it had behind it the whole force of Treasury organisation; and, fourthly, because owing to the circumstances of the time, public opinion gave it power and authority over policy. Thus, it had all the elements which are necessary for effective economy. It effected economies but at a great price—at the price, practically, of dethroning the Government of the day. The Geddes' Committee practically became the Cabinet at that time. I would not recommend such a state of affairs to-day. I do not think our system would stand the repeated dethroning of our Cabinet by any outside authority.
Surely, the object we desire could be made possible by some less revolutionary method. One remedy which has been suggested is that the Cabinet should be reduced in numbers. It may be a course too violent, too revolutionary, and too strange to our methods of Government, to reduce the Cabinet to, say, five or six members. If however, we are finally to find some solution for the question, "What mechanism can effect economy?"
we may find it in some less startling change. Might it not be possible that there should be a Finance Council of the Cabinet, not a council for all purposes, but a council of five or six of the highest officers of the State—the Chancellor of the Exchequer and others who are not associated with the spending Departments—and that by a self-denying ordinance for a limited period of time the Cabinet should delegate to this Council final and unquestioned authority in all financial decisions, such as the limitation and co-ordination of Estimates, and proposals for fresh expenditure? This might be perfectly congenial to our ideas of democratic representation and Cabinet Government. I think it would carry out the essentials for economy by concentrating knowledge and power in the same hands, and those in which alone they can be concentrated. I do not necessarily advocate it as a step for the present time; but I say that if we ever come to the conclusion that it is absolutely essential to put financial considerations before every other consideration and to make limitation of expenditure the prime matter of government for the time being, so that everything else must give way to it, it is only by some such method as that which I have suggested that we can achieve the reduction of national expenditure which we all desire.
The ease, the ingenious ease, based upon sound and timely principles, with which the Chancellor of the Exchequer has bridged his gap this year, may conceal from us the increasing gravity of the position as regards the size of our Budget. The Chancellor said that there will be no substantial fresh taxation this year. That is so. The fresh taxation is small, marvellously small, and it is a wonderful tribute to the inherent strength of this country; but the fact that fresh taxation is small should not blind us to the fact that existing taxation is too great.

Mr. GILLETT: In regard to the Budget, my view in many respects is entirely different from that of the last speaker, especially in regard to the line which the Chancellor of the Exchequer has taken in connection with the economy campaign which has been carried out from the benches opposite. I entirely
differ from the right hon. Member for Norwich (Mr. Hilton Young) on many of the points which he has brought forward in connection with the idea of economy, and the effect which taxation has upon the mind of the worker. The right hon. Gentleman said that the effect of taxation upon a business man was to lead to a reduction in energy. Speaking as a business man, I entirely differ from that view, and I think that remark is as absurd as any remark which I have ever heard from the right hon. Gentleman. What is the effect that Income Tax has had upon a man? If it has any effect, it is the desire to make larger profits in order to make up for the Income Tax you have to pay. That has been the effect upon me, and as far as my experience goes among business men I should say that the effect upon them is pretty much the same. The idea put forward from the opposite benches is that the campaign for economy and the idea of reducing taxation are directed on the same lines.
A great deal of nonsense is talked on the question of economy. There is not a single Member in this Committee who really believes in economy, finally. I have said before in the House, that when we talk of economy we mean economy in things which other people believe in and not in the, things which we believe in ourselves. We have had many pleas from hon. Members opposite for economy. Has any single suggestion been made that economy might be carried out in the Navy? I have heard no suggestion from the opposite benches to that effect. Hon. Members will agree that the staff of the Admiralty is excessive, and probably they would reduce the staff if it were a question in private life, but in the economy stunt that matter has not been mentioned. The military question is taken for granted from the opposite side of the House. We hear nothing of the £14,000,000 spent on the two Dreadnoughts, which Lord Oxford in another place said would probably not be of any use to anyone. That is the kind of campaign which has been carried out, and I was pleased with the way in which the Chancellor of the Exchequer treated it. He took up the challenge of hon. Members behind him and argued out the case for the expenditure for which he was responsible, and then simply said, "You can abolish three Ministries." The heads
of three Ministers were offered on a charger to the hon. Member for Ilford (Sir F. Wise) and his friends, but when I asked the right hon. Gentleman whether the abolition of the three Ministries was going to save anything, the Chancellor virtually told me that there was practically no saving. In other words, the way in which the Chancellor of the Exchequer has treated the whole economy stunt which has been organised recently has been simply to say, "You can have these Ministries if you like, but it means nothing at all."
We have had brought before us the very important question of the effect of taxation upon industry. The right hon. Member for Norwich referred to the Colwyn Report, but did not give us more than one quotation. That Committee has been carefully considering the whole matter and has come to conclusions very different from those which the right hon. Gentleman has laid before the House. The Colwyn Committee have considered the effects of taxation. One of the effects which they considered was the effect upon persons in regard to personal initiative. Another was the question of whether taking the money from the individual prevented the nation getting necessary savings. I would like to lay stress in this connection upon one aspect of taxation that is often overlooked in view of the size of our debt. It is a point which is brought out by the Colwyn Report, namely, that if you raise money from taxation in order to pay interest upon debt it is only transferring certain sums of money from one set of people to another set of people.
When we look at the National Debt and the figures quoted by the Colwyn Committee, we find that one-third of it is held by private individuals. You give these private individuals a sum of about £100,000,000 a year and you take it out of the pockets of the taxpayer. Far from that being a deterrent upon savings, the Colwyn Committee thinks that, by putting it into the pockets of the rentier class, you are giving it to the very people who are most inclined to accumulate savings. The Colwyn Committee have said that, if anything, far from taxation in this case being opposed to saving in all probability the result in the aggregate may be the other way.
Another point brought forward, is the question whether the effect upon savings is serious. On this point the Committee say:
Generally, we conclude that the falling off in the national savings, equal to £150,000,000 or £200,000,000 at present day prices, gives ground for anxiety but not for pessimism.
Although there may be something in the suggestion that taxation has an effect on savings, the Colwyn Committee consider that it is not so serious. My own view is that in all probability we attach far too much importance to the part that wealthy men play in regard to the accumulation of savings and that our financial and industrial system is far better able to gather up small savings and use them than it would if wealthy men ceased to exist; that you would get your savings in that way, with a little more work perhaps, quite as effectively as you do at the present time by piling enormous fortunes into the hands of a few people and then ask them to supply their savings to the nation. There is another quotation from this Report to which I should like to draw the attention of the Committee:
Moreover, so far as the tax is applied in payment of debt interest of persons in a better position to save it may be presumed that the effect on aggregate savings is actually beneficial.
I noticed that one who has urged economy from the standpoint of hon. Members opposite, Lord Inchcape, dealing with the question of our ever-growing expenditure has written an article headed "Our extravagant outlay on social services." When I turn to the article itself, which appeared in one of the financial papers, I find that Lord Inchcape says:
Our people are already paying over to the State not only all that they can afford, but far more than is wholesome for domestic savings and business expansion.
It seems to me an extraordinary thing that a man in the position of Lord Inchcape, who is well acquainted with business affairs and who knows the opinion of the Colwyn Committee, should still be writing an article in which he is prepared to make a statement of that kind. At any rate I put it to the Committee that the Colwyn committee have given more thought to the matter than Lord Inchcape is able to do with his many engagements. An hon. Member opposite
has said that we spend more money on social services than is justified by our resources. The point is: When are our resources at an end? As soon as hon. Members want to have an expedition to China no question is raised about economy or the difficulty of finding the money. The money resources are always found by the Government if they really believe that the money is needed. Hon. Members opposite say that our prestige in China is at stake and that we must find the money. We on this side consider that our prestige is just as much at stake in regard to the health and comfort of our people in our great centres of population, and that, therefore, we must spend money on social services. Evidently Lord Inchcape does not hold this view. He says:
Until the nation is again on an economic basis and can afford more of its surplus wealth for beneficient enterprises, we ought to mark time.
I disagree with him. It is an illustration of the way this matter has been treated that Lord Inchcape entirely ignores our military expenditure, of which he must be well aware, and it might have been found possible to have made some economy in our military expenditure which would have been beneficial. We need to make a protest against the campaign of economy that is being carried on. I protest all the more in regard to the line that is taken and the fact that this important Report of the Colwyn Committee should be ignored in the way that it has by hon. Members opposite. I have quoted extracts, not from the Report signed by hon. Members on this side of the House. The quotations I have read have not come from the Minority Report; I have not in any way alluded to it; I have quoted only the opinions of the majority of the Committee in regard to this important question.
In regard to taxation, the one thing you must keep in mind is that you can arrive at a point where evasion becomes so general that it is impossible to check it. That has been the experience of other countries, and we can see it at times here. So far as expenditure is concerned, it is not the taxation that matters so much as how the money is going to be spent. If you take money for the better education of the children of this country, and it comes out of the
pockets of the wealthy people, I say that the more taxation you have the better. You cannot judge this matter simply by looking at the amount. To my mind the essential point is, where is the money going, how is it going to be spent? In many cases the State is spending money infinitely better than the individual, but the idea of hon. Members opposite is the old idea, that all taxation is an evil, a theory which certainly we on these benches desire to repudiate.
There is another matter to which I should like to refer, and that is the question raised by the Chancellor of the Exchequer in regard to Debt conversion, and what it may be possible for him to do. I regret that the Chancellor of the Exchequer did not dwell a little more on the financial position of the country. Last year he said his Budget was contingent upon what happened in regard to the coal position; and we have had brought us by the hon. Member for Smethwick (Mr. Mosley) the effect of the action of the Government in the return to the gold standard. I entirely agree with my hon. Friend as to the effect it had on the export trade. I believe it has been found to be—and this is confirmed by Sir Josiah Stamp—the last straw in bringing about the final difficulties in the coal position, so far as the industrial condition of the industry is concerned. I am not talking about the political position. It took away from the coal industry the advantage they were getting in their export trade from the position of the exchange. I also agree in what the hon. Member said as to the effect upon the whole social and financial position of the country of the policy pursued during a number of years in connection with the return to the gold standard.
The point I want to bring forward is this: That the Chancellor of the Exchequer, having brought us back to the gold standard, has not in any way dealt with the question as to effect this return to the gold standard is going to have. A question I should like to put to the Chancellor of the Exchequer is: How far the gold problem has been considered by the Government? Up to the present time the Chancellor of the Exchequer has discussed, or has mentioned, what might
be possible if we could only get interest on a lower level. How are we going to do that? Last year we had the bank rate at 5 per cent., and the Chancellor of the Exchequer says that it was due to the coal stoppage. Incidentally the Chancellor of the Exchequer did not quite accurately state my hon. Friend's argument. My hon. Friend's argument was that it was the policy of the Government that finally brought about the coal stoppage. He did not say that the coal stoppage had the effect which the right hon. Gentleman has suggested, and no one will deny that the stoppage, having come last year when we were expecting a fall in the bank rate which did not take place, we watched with much anxiety to see what effect the stoppage of our export of coal was going to have on the New York Exchange. We got through the year without any change, and I should like to know how the Government managed to finance the American debt.
At the close of the War there were £50,000,000 of English securities lying on balance in New York, and a year or two later the Coalition Government withdrew half that amount. When the right hon. Gentleman made his statement in regard to a return to the gold standard he said that there was still a balance of about £25,000,000 on the other side. We have never heard whether in the policy that was then adopted this balance was kept there and really used by the Government in order to help the New York Exchange during the period in which the stoppage was taking effect. I do not know whether it is possible for the right hon. Gentleman to make any statement on this matter. I know it is a matter which should not be made too public, but I am interested to know whether any change was made in regard to the purchase of the dollar or whether it was suspended on account of the money lying over there and nothing done during the crucial months in which we were waiting to see what effect the stoppage would have on the New York Exchange.
At the present time we are waiting for gold to flow into the Bank of England. Are the Government considering the gold position? The Financial Secretary to the Treasury will remember that at the Geneva Conference one of the recommendations was that there should be a
meeting of the central banks in order to consider the policy of all nations in regard to gold; and this is a serious matter. We do not know what is being done amongst the leading nations to see that the supply of gold is not abused. Now that we have gone back to the gold standard this is a serious matter. Suppose one of the nations began to build up a great war chest and put gold away, it would have a tremendous effect on the gold supplies of the country, especially as it is suggested that we may see a diminution in the supply of new gold coming into the world's markets. I wonder how far the Government have considered what effect their new policy in India with regard to the new State Bank is going to have on the gold supplies of the world. It seems to me that these questions should be carefully considered by the Government. I regret that in the annual statement of the Chancellor of the Exchequer we have not had these questions considered. Here is one of the ways in which he can do something which will lead to a reduction in the bank rate, which will bring a saving to him, especially in regard to his Floating Debt.
6.0 p.m.
I regret that when I asked him whether he is prepared to consider Mr. McKenna's suggestion for the appointment of a Committee to consider our banking system, he refused to consider the proposal. I think that, however satisfied those who are responsible for the present system may be as to the methods of its working, they make a mistake in refusing the proposal of so prominent a person as Mr. McKenna that a Committee should be appointed. I confess that I am not fully convinced as to the line Mr. McKenna has taken and as to the suggestion that he has made. Possibly some adoption of the federal reserve system in this country might be helpful. I think it is a mistake for those who are responsible to refuse the granting of a Committee, because there are many people who think that there are very grave defects in our financial system. That view is not confined at all to those who might be connected with the Labour party. Great industrialists have long been anxious and have wondered whether the financial policy of this country was successful. They have had grave views about it for a number of years. They have had brought for
ward by a person of the standing of Mr. McKenna the suggestion that, possibly at a time when you might have an expansion of trade, it would be held up because our banking system is not sufficiently elastic to expand, and they are not at all convinced by the Chancellor of the Exchequer simply saying that he turns the whole thing down and is in no way prepared to give any definite reason for doing so.
These are points that ought to be considered in connection with the whole financial position of the country. The Chancellor of the Exchequer mentioned the saving that might be brought about if a certain rate of interest could be secured. I confess that the Colwyn Report was not nearly so hopeful, and seemed to hold out very small hopes that a large reduction could be looked for in the near future in the rate of interest. In the old pre-War days, at a time like this when there was bad trade, we had an easy money market. We used to find that, if anything, gilt-edged securities rose. But now we seem to have the worst of both worlds, a high rate of interest and bad trade at the same time. That raises the question as to whether our finances are so controlled, as to whether the policy of the Bank of England—in its concern to keep its store of gold and being compelled to give these high rates in order to bring a certain amount of money from America, possibly resulting in our borrowing money from America in one sense in order to pay back our debt to America—is the wisest and best policy or whether nothing could be done to ease the position. That seems to me to be a matter that certainly deserves very serious consideration.
We have certainly had from the Chancellor of the Exchequer an extraordinary set of proposals. Most of us had begun to think, at least I had begun to think as the Chancellor of the Exchequer was speaking, that at the end he would propose sixpence extra on the Income Tax. But once again he has raided certain hidden reserves. He is like a concern that is doing rather badly. He first declares a dividend out of the profits published, and then declares a dividend by bringing in hidden reserves. That sort of thing can be done until a crash comes, and that may be the fate of the Chancellor of the Exchequer in
his next Budget. He may find that, having used these little palliatives, having failed to build up a really sound financial system, having helped to lead us into disastrous labour trouble, at last the harvest has to be garnered and that he has no more of these hidden reserves to help him. We shall see whether that is so in a year's time. The right hon. Gentleman has not imposed any great taxation on the masses of the people, beyond the Tobacco Duty, which may not be seriously felt. He is fortunate in being able to find money by this means. Beyond that, one cannot offer him any great congratulation on his Budget. We can only hope that a year hence the country's position may have improved, that we may find ourselves in a happier position than that of to-day, and that some of the difficulties that beset us now may have passed away.

Sir FREDRIC WISE: The hon. Member for Finsbury (Mr. Gillett) dealt with many subjects. I do not propose to follow him in regard to China, and I have not had the pleasure of reading Lord Inchcape's article; otherwise I feel confident that I should have agreed with it. I am not going to follow the hon. Member in regard to the technicalities of the gold standard, but I agree with him that a Committee on gold and currency might be set up to look into the subject more or less on the lines which were laid down by Mr. McKenna in the annual report of the Midland Bank. The hon. Member for Finsbury referred also to the gold that was going to India. As he must know as well as anyone who deals with the gold subject, India has a tremendous appetite for gold and is always hoarding it. I agree with the hon. Member in regard to the Colwyn Report. I am sorry that the Chancellor of the Exchequer did not congratulate that Committee on the heavy work they have accomplished. I would like as a humble back bencher to congratulate the Colwyn Committee on their Report. Everybody who is interested in finance would agree that it is a notable contribution to economic literature and to the library of anyone. I am sorry it was not a unanimous Report, though one could not expect that. The Majority Report, I feel, was sound, although I did not agree with all of it. The Minority Report, I felt, was rather
written for the Labour party, and I am sorry to say that I regarded it as more political than financial. It was too much theory and too little practice.
I would like to congratulate the Chancellor of the Exchequer on what I think might be called almost a unique Budget. There is a great deal of book-keeping in it. But many difficulties have been surmounted, and one cannot hardly realise those difficulties unless one has the responsibility of the office that the right hon. Gentleman holds. I did not agree with all his speech, but I think he is to be congratulated on the unique position that he presented in the Budget yesterday. I often feel that the Chancellor of the Exchequer does not appreciate the full responsibility of national credit. I do not think the, national credit was ever mentioned yesterday. We all must appreciate that it is the essence of our life that national credit should be kept cheap, so that we may trade and trade successfully. It may be said that national credit is the oxygen of trade and trade is the breath of life. It is essential that national credit should be kept cheap. The main point in regard to national credit is that the Budget should be balanced and that there should be a certain amount of extra revenue that can be devoted to reducing a debt. We more or less live on national credit.
I remember that about October, 1923 a Minister of the Coalition Government made a speech in the country, in which he stated that the Government were going to inflate. Although it was denied, in two or three days the surprising fall in our exchange and in Stock Exchange securities showed anyone who understood the national credit how delicate it was and is, and how essential it was and is that it should be preserved to the utmost limit. I feel that as far as this Government is concerned we have been very loose with our national credit. Although our external credit has been wonderful during the last year—the sterling dollar exchange highest point was 4.86⅞ and the lowest was 4.84½, and that shows how wonderfully the external national credit has kept—yet at the same time I feel that the Chancellor of the Exchequer has only just realised the importance of the subject. I refer to the meeting he had with the Federation of British
Industries. I understood from the reports in the newspapers that the Federation wanted to increase our debt and to spread the losses of the coal stoppage over a period. I was delighted that the Chancellor of the Exchequer replied:
But as they had urged a policy of borrowing he felt bound to point out to them that this was not a time to weaken or dissipate the national credit.
The right hon. Gentleman went on to say:
Every form of borrowing impaired the national credit.
How true! I regard a statement of that kind from the Chancellor of the Exchequer as of the highest importance. It is backed up by the Colwyn Report, which states in regard to guarantees:
We would in this connection stress the desirability of confining to the narrowest possible limits the issue of securities to which the Government guarantee is attached.
That advice from the Colwyn Committee is most important. These guarantees all affect our national credit. As the Chancellor of the Exchequer must know, they affect not only our national credit but our national debt redemption and conversion and taxation.
May I now come to the National Debt itself? Its growth has been alarming and is not realised by the public. In 1925 it was £7,646,000,000; in 1926 it was £7,615,000,000, a small reduction; in 1927 it was £7,623,000,000, an increase over last year. I have not allowed for the Victory Bonds which were taken over by death duties. We cannot really afford this growth. I fully realise that £7,000,000,000 of that is unproductive; it was money spent in the War. But I feel confident that the burden of this National Debt is affecting our trade and industry. If you take the debt per head of the population, in Britain it is £168, in Australia £76, in Canada £52, in the United States £34 and in Germany, excluding reparations, it is only £7. And Germany was our enemy. If the Chancellor will forgive me for saying so, I cannot believe that there has been wise management of the National Debt. I dislike these increases, and it is terrible to think that, even in a bad year such as 1926 was in regard to internal credit, our National Debt should be increased by any amount. How can it be reduced?
It cannot be reduced by the quack remedy of the capital levy or by the mirage of reparations or Allied debts. It can only be reduced, as the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) has said, by economy—by reduction of Government expenditure. The Chancellor's Economy Act of last year was a Measure from which everyone expected much, but I think the only real economy which was brought about by it was in regard to the Representation of the People Acts, in connection with which there has been one registration instead of two in the year. I notice from the Estimates of this year that there has been a reduction of £98,000 in that respect. The other amounts concerned were more or less readjustments, and, although I believe in all reduction of expenditure, I think that Act was not quite as strong as it might have been.
I remember the Chancellor—I think it was in 1925—stating that "expenditure governs the position." It is perfectly true that expenditure governs the position. It is more important than revenue. As long as you look after expenditure, I think revenue will, more or less, look after itself. But we have had this upward curve in expenditure. In 1923–24, under a Conservative Government, our expenditure was £788,000,000. In 1924–25 under the Labour Government our expenditure was £795,000,000. In 1925–26 under a Conservative Government it was £826,000,000, in 1926–27 it was £842,000,000 and this year the estimate is £834,000,000 What is the largest item in that expenditure? It is the interest on the debt. I feel that this interest on the debt, amounting to over £300,000,000, half again as big as the total pre-War Budget, is excessive, and ought to be reduced whenever possible. In 1923–24 it was £307,000,000, in 1924–25 it was £312,000,000, last year £318,000,000, and this year the Estimate is for £305,000,000, a reduction of only £2,000,000 in that long period between 1923–24 and this year. On what does this depend? I will give three items. The right hon. Gentleman the Member for Colne Valley referred to the Treasury Bill rate. One of the things which affects the Treasury Bill rate, is the money market. That is one of the points which makes this large amount of interest £305,000,000. The money market has nothing to do with the Government. The Government
cannot regulate it, and the interest on the Treasury Bills is affected entirely by supply and demand. No Chancellor could affect the actual rate which we paid in 1926 as compared with 1925, or when the Labour Government were in office. Item No. 2 is the Sinking Fund, which affects the interest rate. The Sinking Fund is one of the most important problems which this country has to consider. The amount of £65,000,000 for this year is very large. It depends on whether trade can stand £65,000,000, because every penny that is taken by the Government has to be met by trade.
I feel this year £65,000,000 is a large amount to be supplied by trade—I am an apostle of the Baldwin Sinking Fund, though I am not altogether in favour of increasing it perhaps beyond the £50,000,000, as stated by my right hon. Friend the Member for Norwich. I should like to point out to the Chancellor my third item in regard to the interest charge, namely, the conversion of loans from a high interest to a low interest. Have these conversions been judiciously handled? Let me explain. The amount to which the people have been taxed for the reduction of debt is about £730,000,000 since 1920–21, and yet the debt has been reduced by only £265,000,000. Why is this? It is the issue of conversion loans at a discount which has taken this large amount from the taxpayers, while only reducing the debt by the amount I have named. I implore the Chancellor that future conversions should not be issued at a big discount. The State may pay a reduced annual charge at the expense of an increased capital payment. It is not sound finance, but may I refer to the figures given in the Colwyn Report in regard to the conversion of loans up to the end of the year? That Report states that the maturities were £1,275,000,000 and they were converted into £1,532,000,000, and the principle of the National Debt was increased by £283,000,000, but the interest was reduced only by £1,191,000. I know the Chancellor is aware of this and that he has to consider the two sides in this matter. There is the investor on one side, and the taxpayer on the other. I feel it is possible that his advisers are advising him from the investors' point of view more than from the taxpayers' point of view, and I beseech him, with
all the power I have, not to issue these loans at a large discount in the future.
Take the last loan which he issued in December, 1926, and referred to by the right hon. Gentleman the Member for Colne Valley. It was 4 per cent. interest issued at 85 for the £100 stock. What does that mean? It means a 15 point discount, which added £32,000,000 to the National Debt, without a penny being received from this amount of £32,000,000, and that is one reason why the National Debt is higher this year than it was last year. What is worse, there was a 5 per cent. Sinking fund to the issue. Never before has a British Government security been issued with a 5 per cent. Sinking fund attached to it. It is all very well having bread, butter and jam. Let me assure the Chancellor of the Exchequer we can only afford bread and butter at present, and there is a possibility in the future, unless we are most careful, that we shall only be able to afford bread. Not one of the big Chancellors of the Exchequer in the past, such as Gladstone, Goschen, Goulbourn or Robinson would have recommended the issue of these large loans at such discount; they were all against such procedure, and I implore the right hon. Gentleman that in future that loans should be issued nearer par, even if bigger interest it to be allowed to the investor. If he compares these rates with the rates of 100 years ago, he will find that the rates of securities on a 3 per cent. basis were the standing about 82, and the quotation has been higher. I think all our Chancellors have rather neglected to look into the past. I know it is very different in certain ways, but I think it might have been better had they looked into the past. The Colwyn Report states:
We are of the opinion that it would be in the best interests of the State to issue all future loans at a figure not very appreciably below par.
That is again emphasising the necessity that these loans should be issued at very near the actual nominal figure. I have endeavoured to show why the interest charge is so high and the necessity for good management. I congratulate the right hon. Gentleman with regard to redundant Ministries. My hon. Friend the Member for Gainsborough (Captain Crookshank) put down a Motion together with some other hon. Members and myself regarding these Ministries. We did not put it down without looking into
the details very carefully, and I feel confident that there are many other points in regard to expenditure which could be looked at in the same light as these Ministries have been looked at and expenditure reduced. The right hon. Gentleman the Member for Norwich referred to the Public Accounts Committee. We have certain opportunities on that Committee of showing where national expenditure can be reduced, and if the Chancellor set up perhaps a further Committee, or extended the powers of the Estimates Committee, to go into these expenditures thoroughly, I feel sure he would be able to see further details where certain economies could be made. As we all know, he has not time himself to go into the close details in regard to expenditure.

Mr. CHURCHILL indicated dissent.

Sir F. WISE: I am pleased to hear that the right hon. Gentleman has time, but, perhaps, in future the Public Accounts Committee might be able to help him in many ways in this connection. I have endeavoured to show the importance of the national credit. I have endeavoured to show how the National Debt has risen. I have endeavoured to show how important it is that these conversion loans should not be issued at such a large discount. I realise that there is no royal road to a substantial reduction of debt and taxation except by hard work, production, markets and savings. No country is quite the same as ours. I realise that the House of Commons has a certain amount of responsibility with regard to expenditure. I realise all that was said by the Prime Minister in his Election Address, and what was said in the King's Speech of December, 1924, and what was said by the Chancellor of the Exchequer in 1925. In another place, the Leader of the Government there, in a Debate on national expenditure, said:
I would venture to say that if you want to find the principal criminal in the heavy burden which is thrust upon the country he is to be found in the House of Commons.
I am not quite certain whether the criminal indicated is the Chancellor of the Exchequer or the back bencher. I do not think it is the Chancellor of the Exchequer because he and the Noble Lord are members of the same Cabinet, and they would not term each other
criminals. Consequently, it must be the back bencher in the House of Commons who is referred to, but I think if the Chancellor of the Exchequer would rely on the back bencher, and give him a little more control and allow him to help, so as to show that the Government in Measures of economy have the full backing of the party on this side, I feel confident that the right hon. Gentleman would get a great deal of advice which possibly might be useful to him in the future. We have created the greatest Empire of modern times. Britain has amassed a capital of fabulous amount. Britain has a credit system which is peculiar to no other country. It has no parallel. If you destroy it, remember, Britain cannot recover. Other countries can. I sincerely hope that the Chancellor of the Exchequer will grasp the nettle and see that expenditure is reduced.

Mr. PETHICK-LAWRENCE: I was very glad to hear my hon. Friend the Member for Ilford (Sir F. Wise) stress the importance of the national credit, and also glad to hear him attack, in no measured words, the very gravely mistaken policy of issuing loans at a considerable discount. But I was not so pleased when he appeared to me to agree with the right hon. Member for Norwich (Mr. Hilton Young), in what I can only describe as his pernicious doctrines with regard to the Sinking Fund. The right hon. Member for Norwich, going against the weighty Reports both of the Majority and the Minority of the Colwyn Committee, plumped for no increase in the Sinking Fund, but that is not all. The doctrine of the right hon. Member for Norwich is to make a habit of paying £50,000,000, and the way in which you are to do that is to pay £36,000,000 one year and £24,000,000 the next, and to do nothing whatever to remedy the injury that you have wrought in the national credit. I hope I am mistaken in thinking that the hon. Member for Ilford agrees with that doctrine.

Mr. HILTON YOUNG: The hon. Member would be quite mistaken in thinking that I agreed with that doctrine, which has no resemblance at all to what I ventured to express.

Mr. PETHICK-LAWRENCE: What the right hon. Member did say was that what he recommended was aiming at
£50,000,000 in the last two years and doing nothing whatever in the following year to make up the deficit, but postponing an addition to £50,000,000 to some bumper year that might or might not come in the remote future. I think the Committee will agree that that is the view which he expressed. The right hon. Gentleman also made this statement, and it has been echoed in effect in other parts of the House, and is the popular view with regard to the situation. I put down his words. He said it was not that we had no Sinking Fund, or that we had made no reduction in debt, but that we did not succeed in paying off as much debt as we anticipated. I am quite aware that that is the popular view. The view is that the Sinking Fund goes as a whole to the reduction of the debt and that in a full year, when we are having a complete Sinking Fund of £50,000,000, the net debt of this country is being reduced by £50,000,000. That is an entire delusion. The net debt of this country is not being reduced even when there is a Sinking Fund of £50,000, and looking over the years that have elapsed since the Armistice, I have no hesitation in saying that the net debt has increased enormously since the Armistice, that it has been increasing almost continuously during the whole period, and that it was increased by quite a considerable amount during the last two years during which we have had the present Chancellor of the Exchequer.
This may appear to hon. Members as not capable of proof, and they may perhaps think that I am referring to the change in the purchasing power of the pound. That is, of course, a very important consideration and has added enormously to the burden of the annual debt, but that is not the point to which I am referring. I am referring to a purely money figure of debt, and I say again that during the years since the Armistice, the net amount of the debt, in pounds, shillings, and pence, has suffered an enormous increase, and that it has actually been increased during the last two years while we have had the present Chancellor of the Exchequer. That statement may appear quite ridiculous. Perhaps it appears to some hon. Members like the case of a British section of the Army during the War, that was marching towards a certain town in France. The colonel caused an inquiry
to be made from a rustic as to how far this town was ahead, and he was told that it was 10 kilometres. It was a very hot day, and they marched for what seemed hours, and then inquired a little later on of another rustic how far this town was ahead. The answer of this rustic was again that it was 10 kilometres. They marched on and on again, and became footsore, and then they asked a third man how far they were from the place. He also said "10 kilometres," so the colonel then said, "Thank God, the place is not gaining on us!"
I think it may appear very likely that that is what is happening in the case of this increase in the National War Debt, because unfortunately unlike the place in the story, the fact is that the net debt is actually increasing and has been increasing ever since the Armistice. The reason why that has not become apparent to the ordinary public and has escaped the eye of a great number of people who are keenly interested in finance is that our accounts are never presented in the form of the accounts of a company, and they never show what would correspond to the balance-sheet of a company. When you are endeavouring to discover the net assets of a company, you subtract the gross liabilities from the gross assets. Unfortunately, the State is in a position in which the gross liabilities exceed the gross assets, and in order to arrive at the net debt of this country, you ought strictly to subtract the gross assets from the gross liabilities. During the years since the War, the gross liabilities have been increased in various ways, and the gross assets have been decreased, and in consequence of those facts, and in spite of the large amount paid off through the Sinking Fund, you reach the statement which I made before, and which I am going to illustrate by figures. But first of all let me sum up the conclusion which I have reached, that since the Armistice the net debt has steadily increased.
The total amount of increase is something between £800,000,000 and £900,000,000 at the very least, and even if you write off the new loans that were floated after the Armistice in order to wind up the War, you will find that the net debt increased by between £300,000,000 and £400,000,000. If you take the separate years from the Armis-
tice up to the present time, you will find that in all that period there are only two years when anything like a substantial reduction was made in the net debt. One year was when the present Prime Minister was Chancellor of the Exchequer, and the other year was when my right hon. Friend the Member for Colne Valley (Mr. Snowden) was Chancellor of the Exchequer. If you take the last two years during which the present Chancellor of the Exchequer has been in office, you will find that the increase in the net debt has been from £18,000,000 to £30,000,000, according to the way in which the figures are taken. What are my grounds for making this statement?
First of all, what have been the reasons which have increased the gross liabilities of the State? Immediately following the War, there was an addition to the actual borrowing for the purpose of winding up the War, and I believe that that was certainly over £500,000,000. In the next place, we have had the conversions at a discount. The hon. Member for Ilford referred to the recent conversion at a great discount by the present Chancellor of the Exchequer, and he rightly pointed out that that was done at a loss of something like £30,000,000 or £32,000,000. That is an increase in the face value of the debt. But we had another and still more disastrous conversion by another Conservative Chancellor of the Exchequer a few years ago, and that was the conversion when no less than £130,000,000 or £140,000,000 were added to the face value of the debt, during the year 1922–23. I am not quite sure whether the right hon. Member for Hillhead (Sir R. Horne) was still Chancellor of the Exchequer, or whether the Prime Minister had taken over the reins, but I think the right hon. Member for Hillhead was, at that time, guilty of that very grave error, causing an increase in the face value of the debt of some considerable sum over £100,000,000. Taking all the conversions at a discount together, the total increase in the face value of the debt in consequence is something like £290,000,000. That, I think, and the item of the actual floating of new War Loans, actually appear in the figures which are given, but now I come to two items which are excluded altogether from the figures shown in the Financial Statement of the year.
The first item relates to the net interest on Savings Certificates accrued, but unpaid. I asked the Chancellor of the Exchequer a few days ago what was the total amount of Savings Certificates outstanding on the 31st March last, and the answer was £362,000,000. The rate of interest paid on Savings Certificates is about 4 per cent., and that works out, therefore, that the interest is accruing on the present holding of Savings Certificates at something like £15,000,000 per year, but no account whatever is taken of that fact by the Treasury. The Savings Certificates still continue to be marked down in our accounts of debt at their purchase price, and the only way in which the Treasury have attempted to deal with the situation is that when Savings Certificates come to be paid off, the full amount of interest becomes due. If Savings Certificates remained at a constant level, if the intake and the outgoing were exactly corresponding every year, and if that had been going on from time immemorial, the method of the Treasury would fairly accurately represent the true facts, but quite the contrary is the case. Savings Certificates are very rapidly increasing, and, with the exception of last year, they have been going up steadily ever since they were first initiated.

Mr. RUNCIMAN: Hear, hear!

Mr. PETHICK-LAWRENCE: I quite agree; it is a very good thing. But while it is a good thing, it is also very desirable that the Treasury should show the exact facts with regard to the repayment of interest which is due upon those certificates. I notice that the Chancellor of the Exchequer yesterday pleaded that one of the reasons for his failure to balance his Budget was the very large payment off Savings Certificates. I looked in the Statement, and I found, I think it was £35,000,000 that were paid off and £32,000,000 that were received. What I want to suggest is that even though £35,000,000 were paid off and all the accrued interest upon this I very much doubt whether the total amount of interest which the Treasury actually had to meet was equal to the new interest of the year. Hon. Members can easily work out the sum. The interest due on the £362,000,000 is somewhere over £15,000,000—between £15,000,000 and £20,000,000. I very much doubt whether the accrued interest of £35,000,000 paid
off amounted to anything like £15,000,000, and I shall be surprised if it exceeded £12,000,000. Taking the previous year one finds that the amount in respect of new Savings Certificates paid off was less than the new ones which came in, and, therefore, as a matter of fact the amount of interest debited by the Treasury was very much less than the amount actually accrued. Under the circumstances I think it is fair to assume that about £10,000,000—of course, the figures I give can only be rough estimates: only those at the Treasury can obtain the actual figures—ought to be added to the probable figures of the debt to show the increase during the last two years due to this source. For the period since the Armistice on this account probably about £70,000,000 of increase of the national indebtedness ought to be debited which is not shown in the figures of the year.
Savings Certificates do not stand alone. In addition we have the case of War Bonds. All the War Bonds at 5 per cent. are due to be paid off at a premium of 5 points when the date of redemption, which is quite near at hand, arrives. No account is taken of that premium in the figures presented by the Treasury as to the indebtedness of this country. Some time in 1923 a question was asked of the then Chancellor of the Exchequer, who said the total premium on all 5 per cent. National War Bonds would amount to £35,750,000. Some of these, of course, have been converted, and any loss arising from that conversion I have already taken account of, but I think it would be not unreasonable to take it that since the Armistice there has been a total addition on this account to the National Debt of £25,000,000; and during the last two years something like £6,000,000 has been added to the National Debt in that way. If we take all these figures together we shall find that the actual increase in the gross liabilities of the State since the Armistice is something like £885,000,000, and that during the two years the present Chancellor of the Exchequer has been in office the increase has been no less than £46,000,000. Even if we exclude the actual borrowing to wind up the War, there is a very substantial increase in the National Debt, due to these various items by which gross liabilities have been increased
Most hon. Members think that is the end of the picture, but this is by no means the case, because we have also to take into account the wasting assets to which this country, as a State, is entitled. They are of many and diverse kinds. First of all there are the war stores which were sold. At the time of the Armistice we held extensive war stores. The money obtained for war stores has been put to revenue and not credited to the capital of this country. At the beginning the sale of war stores was actually used—I think almost unconstitutionally, though some sanction may have been given—in relief of the burden of the Ministry of Munitions and of other Departments. The other day I made inquiries from the Chancellor of the Exchequer and was told that the total amount of war stores which had either been put to the credit of one of the Departments or brought into revenue was no less than £433,000,000. Even that figure seems to me to be below what is generally believed to be the case, and I am wondering whether some item has been omitted from this total. During the last two year £10,000,000 from that source has also been put to revenue.
What has been said about war stores applies equally to shipping liquidation. I have not been able to get the exact figure there, but my belief is, and I think the figure is roughly right, that round about £100,000,000 has been taken on account of shipping liquidation and has been put to the ordinary revenue receipts of the country and not put to capital. How much, if any of that, has accrued in the last two years I am not quite sure, but I think it is only quite a small amount. In the main, I think, the shipping liquidation wound up some little time ago.
The next item is Dominion loans. During the War we lent a considerable sum of money to our Dominions and they lent a certain amount of money to us at the same time. After the war was over there was some cancellation of debt. We cancelled debt they owed to us against their cancellation of debt that we owed to them, but there has remained a certain residuary amount of debt which the Dominions owe to us, and of late years they have been paying it off. A few days ago I put a question to the Chancellor of the Exchequer on this subject and received this statement—that of the balance
of nearly £35,000,000 received roughly £25,000,000 was, prior to April, 1922, treated as revenue, and the sum of approximately £10,000,000 has since April, 1922, been paid to the National Debt Commissioners, to be used in cancelling debt. That is from the OFFICIAL REPORT of 22nd March. From that statement I am not quite sure whether the £10,000,000 which since April, 1922, has been paid to the National Debt Commissioners to be used in cancelling debt is really outside the Sinking Fund, or whether it is really included in the Sinking Fund of £50,000,000. If it is so included, then the total amount which has to be taken account of in regard to this is no less than £35,000,000 since the Armistice, and probably about £4,000,000 in the last two years. If the other reading is correct—and perhaps later on the Financial Secretary will be able to tell me which is correct—then only £25,000,000 should be debited in this way, and probably in the last two years there will have been nothing at all. But, as a matter of fact, in all probability I think, the looser method of book-keeping has been actually followed.
We now come to Allied debts. According to the statement of the Chancellor of the Exchequer, £12,000,000 of Allied payments have been made, of which £10,000,000 has been paid in the last two years. When we pay the United States we very carefully separate the interest payment from the capital amortisation, and we reckon that something like £28,500,000 is interest and £4,500,000 is capital amortisation. When the Allies pay us sums in discharge of their liabilities we treat the whole of that as interest. I think the very least we could do would be to reckon part of it as interest and part as capital; but I venture to say we ought to go further than that and treat the whole of it as capital; and for this reason—that we reduced the payments from our Allies so low that I believe it is correct that in almost every, if not in every, case the total payments over the whole period of time during which they are to continue will not aggregate to the total amount of their capital debt. Therefore, in effect, they are paying off capital all the time, and we let them off at a rate of interest of zero, or even less. In some cases there may be
some amount on the other side, and in that case a small amount should be written off. I am not objecting to that I have taken the view that the Chancellor of the Exchequer was perfectly right in making a friendly arrangement with our Allies and allowing them this favourable treatment, but when you are dealing with book-keeping you have to take a strict view to see what is happening, and, according to my reckoning, something between £9,000,000 and £12,000,000 has been the reduction of the assets on our account since the Armistice, and over £8,000,000 to £10,000,000 during the last two years.
Finally, we come to German reparations. A great deal of reparation received from Germany has already been taken account of in the earlier periods—part of it was received in ships, and partly in intangible things, but we have it from the Chancellor of the Exchequer himself that in the last two years no less than £24,000,000 has been received in reparation from Germany. There, again, you may, if you think it desirable, regard that, a part of it, as definite income, but part of it, at any rate, should be treated as capital repayment. For the last two years I put down anything between £12,000,000 and £24,000,000 as the wasting part of our assets in this connection—and certainly £24,000,000, and probably a great deal more for the whole period from the Armistice down to the present time.
I am now in a position to sum up the results of the investigation which I have been making along these lines. If you take the whole period since the Armistice and take together the increase in the gross liabilities and the decrease in the gross assets you reach a sum of close on £1,500,000,000 to the bad with regard to the debt. As against that the sum of approximately £600,000,000 has been paid off in the shape of sinking fund, leaving nearly £900,000,000 increase in the net debt of this country. In the last two years, with the present Chancellor of the Exchequer, something between £76,000,000 and £94,000,000 represents the increase in the net debt, as against which only £60,000,000 has been paid off in sinking fund. Therefore, you find that the net debt of this country, even taking into account the whole of the sinking fund, has certainly increased by
£16,000,000, and probably by considerably more than that amount in the last two years. That, in my judgment, disposes of the view, the facile view, the view which it is so easy to hold, that all the time we are gradually reducing our debt. We are doing nothing of the kind. We are increasing our debt with every year. The hon. Member for Ilford said it is the expenditure that we have to look after, because the revenue will take care of itself. My answer is that the revenue has not taken care of itself. Chancellors of the, Exchequer, and particularly the present Chancellor, have been at no pains to see that the capital balance sheet of this country was being preserved from lowering the stability of this country; and it is in consequence of that that the credit has been going down. As a matter of fact, the £60,000,000 set aside by sinking fund during the last few years has not only provided no amount for the reduction of the net debt, but it has left a large margin for the actual increase of the net debt.
7.0 p.m.
I have already kept the Committee too long, and I have only two words to say in conclusion. So far I have been dealing with the past. What about the future? The Chancellor of the Exchequer said that having failed in the year 1925–26 and having failed in the year 1926–27, he was going to turn over a new leaf and was going to produce a wonderful Sinking Fund of £65,000,000 by way of surplus in the year 1927–28. But is he? In the first place, one step he takes is to raid this £12,000,000 reserve of the Road Fund. It is one of two things—either this is a real sum allocated to the roads, in which case he is raiding the expenditure upon the roads, or it is merely a balance in reserve, and what he is simply doing is a book-keeping transaction—transferring one account at the Treasury, the Road Account, to another account at the Treasury, the Sinking Fund—and it would be just as simple to have raided the Sinking Fund straight away as to have raided the Road Fund.
What about China? It is rather an irony in the present Budget that the Chancellor is putting a new tax on china, but what about the China in the other meaning of the word? It cost £1,000,000 to send out the first batch of troops. Either the troops are going to come back
fairly soon—in which case we may have another £1,00,000 to bring them back in addition to the sending out and bringing back of the second lot—or if, as I think is much more likely, these troops are going to stop in China for a considerable time, the cost of all that is going up and up, and neither the Chancellor nor the Financial Secretary will put their hands on their hearts and say, "This is all the expenditure we are going to incur, and all the troops we are going to send out." They know perfectly well that the policy pursued by the Government may involve very much larger expense, and, if it does so, we shall have the Chancellor for the third time coming and saying, "I had raised £65,000,000, but China, or something else, has dissipated the whole of my Sinking Fund, and I am down on the rocks as before." The policy by which they are going on with their expeditions and pursuing their large military and naval exploits, like the building of the dock at Singapore, has widely extended the expenditure of the country, and by cutting off prematurely the Income Tax has prevented the revenue from providing a surplus out of which alone a larger Sinking Fund and larger reduction of debt can be achieved. The hon. Member for Ilford desires greater credit for the country, in a financial sense. That credit has been impaired not merely by the Chancellor of the Exchequer but by the whole policy of the Government, and, as long as that policy is maintained, the credit of the country will never be restored.

The FINANCIAL SECRETARY to the TREASURY (Mr. Ronald McNeill): The last point made by the hon. Gentleman opposite is no doubt an extremely important one, but it can hardly be said, in any strict sense of the word, to be a Budget point. Of course, I quite agree that the expenditure of the country, and therefore the finance, to be discussed in this Budget is a matter that must depend on policy. That is obvious, but this particular question as to the necessity or otherwise of sending troops to China has been discussed on its merits in this House. Hon. Gentlemen opposite may disagree with the policy of sending troops to China, although I do not think they have, as a matter of fact, suggested any practicable alternative which would
not have had very disastrous results to this country. At all events, that is a matter which must be, as it has been, discussed upon its merits as a matter of policy, and I do not think it really enters, or ought to enter, into the discussion of the actual financial arrangement for the year.

Mr. PETHICK-LAWRENCE: May I ask one question? What account has been taken in the Budget of the sums necessary to keep that force there, and bring it home again?

Mr. McNEILL: I cannot answer that question, because I do not know, and no one knows, what these sums are or will be. That does not affect the merits of the policy itself, and I am now only attempting to deal with the actual financial proposals of the present Budget. The hon. Gentleman who has just sat down has not by any means been alone in having taken part in this Debate without saying very much about the Budget in the strict sense of the word. We have heard a number of very interesting and informative speeches, including a very interesting speech from my right hon. Friend the Member for Norwich (Mr. Hilton Young), and they and other hon. Members have said a good deal upon matters which may be described as the general financial system of the country—quite a legitimate form of discussion, I agree, for a general Debate on the Budget, but not, except indirectly, related to the actual proposals put forward by my right hon. Friend in opening the Budget yesterday.
I think we may very fairly congratulate ourselves upon the fact that the Debate has now gone on to this second day without there being anything in the nature of closely-reasoned criticism of the actual proposals which my right hon. Friend expounded to the House yesterday. I regret that the right hon. Gentleman the Member for Colne Valley (Mr. Snowden) is not here, because I wish to say something with regard to his observations. I noticed, even in regard to his speech—which was a very interesting speech and added very much to that entertainment which the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) said ought to contribute to the Exchequer—that
though he made, as he always does, a very clever and bitter speech with reference chiefly to my right hon. Friend, he did not, as I hope to show, offer really any very close criticism of the actual Budget proposals. I think if the right hon. Gentleman were here, I should venture respectfully to offer him my compassion, because it was quite obvious, not so much from his speech to-day as from his very short speech yesterday, that when my right hon. Friend sat down, after expounding the Budget, the right hon. Gentleman opposite was suffering, as one could very easily understand his suffering, from very severe disappointment. The reason for that is not far to seek. The right hon. Gentleman came down to the House yesterday feeling quite certain that he was going thoroughly to enjoy the utter and complete discomfiture of my right hon. Friend. I closely observed the right hon. Gentleman, and, as my right hon. Friend unfolded his speech and expounded his proposals, I saw the face of the right hon. Gentleman opposite visibly fall as he saw in progressive fashion how the anticipated triumph was going to be snatched away from him. He could not conceal his chagrin. This is what he said, speaking of my right hon. Friend:
The right hon. Gentleman was faced by difficulties which would have been the despair of most people."—[OFFICIAL REPORT, 11th April, 1927; col. 99, Vol. 205.]
That is perfectly true. He was faced by difficulties which would have been the despair of a great many people. Then the right hon. Gentleman went on to complain that the Chancellor, in these circumstances, faced with these difficulties which would cause despair to anybody else, had come down to the House, not in a proper mood of penitence and appropriately dressed in sackcloth but, to the right hon. Gentleman's horror and amazement, had made excuses and no apologies. It is quite clear from those sentences how desperately the right hon. Gentleman suffered from the obvious and acknowledged success and brilliancy of my right hon. Friend's speech. The reason my right hon. Friend did not make any apology is not far to seek. It is because those difficulties which would have caused despair to anybody else, were, as he conclusively showed to the House, none of his making. They were difficulties for which neither he nor the Government of which he is a member
had the slightest responsibility. My right hon. Friend gave chapter and verse for that statement, and he showed as clearly as anything could show that the difficulties which had occasioned the whole of our present financial impasse were caused by the industrial events of last year. I do not think there can be any doubt about that. He showed, further, apart altogether from the stoppage of last year, that by far the larger part of the increased expenditure that he was called upon to meet by revenue had been brought about by causes antecedent altogether to the existence of the present Government. He showed that that expenditure arises, first of all, partly from the increment of salaries and the rise in wages, and partly from the contribution which the Government are under obligation to make in respect of unemployment and insurance and grants to local taxation. All those matters are entirely outside the control of the present Government.
When hon. Gentleman opposite and some of my hon. Friends on this side look at the expenditure as a whole, and wonder why much larger economies are not made, I wish they would impress on their mind the figure which appeared in the White Paper at the bottom of page 7, which showed that the whole of the expenditure of the country which, under the circumstances, can really be classed as being under the control of the Government, amounts to £156,282,000. The question of Government control does not arise in connection with obligatory services, grant services, and the cost of the self-supporting services, and it is only with reference to national administrative services, and to the cost of them, that the Government really have any control at all. It is very important that the House and the country should realise that distinction.

Colonel WEDGWOOD: May I ask one question? Does the right hon. Gentleman assume that the Government had no control over the interest paid on the National Debt? Does that not depend on sound finance?

Mr. McNEILL: I do not quite know in what sense the right hon. and gallant Gentleman means that.

Colonel WEDGWOOD: At what rate will you be able to convert your debt?

Mr. McNEILL: We shall convert it in the usual way. So far as the interest payable upon money of the various forms of debt is concerned, that is expenditure which the Government are bound to accept, and certainly there is no alternative which the present Government would take into consideration at all. Short of national repudiation of debt, I consider that the service of the debt is not expenditure over which the Government has control. I point out that fact, and I insist upon it because I think it is desirable that it should be present to the minds of hon. Members. The hon. Member for Thanet (Mr. Harmsworth) made a speech yesterday in which he spoke of the possibility of a Chancellor of the Exchequer coming forward and proposing a reduction in national expenditure of £50,000,000, £60,000,000 or even £70,000,000. I wish the hon. Member for Thanet, or any other hon. Member who thinks that a reduction in expenditure on that sort of scale is possible, would help us by going a little further and indicating where those cuts could be made, what particular service is it they have in mind. Is it the Navy that is to be still further cut down? Are the defensive forces of the country to be still further cut down?—[HON. MEMBERS: "No!"] Is education to be largely cut down?—[HON. MEMBERS: "No!"] Is there to be a reduction of insurance contributions and contributions to local taxation and so forth?—[HON. MEMBERS: "No!"] That is what I expected. Those are the various items where expenditure is high, and where alone it would be possible to get economy on a large scale, and naturally we find one after the other is repudiated by hon. Members as being a possible means to effect a reduction of our expenditure.
Therefore all these exhortations to economy, when they are made in general terms without any indication of where the extravagance is to be found, are really not very helpful. Yesterday the Chancellor of the Exchequer announced the abolition of three post-War Ministries. He did not suggest that that in itself would produce any very large scale of economies, but, at all events, it will mean some economies, and it is certainly intended to be an indication that the Government are not prepared to turn
down any reasonable suggestions by which economy can be effected. Already I notice that no sooner is that suggestion made than each one of those Ministries which are to be wound up, after having been roundly abused, has found unexpected defenders in the course of the last few hours. When the right hon. Gentleman the Member for Colne Valley speaks about the responsibility of my right hon. Friend for the growth of expenditure, and when some hon. Gentlemen opposite went further and have actually said that on my right hon. Friend rests the real and ultimate responsibility for the stoppage in the coal industry last autumn—[HON. MEMBERS: "Hear, hear!']—I am not at all sure that the ex-Chancellor of the Exchequer did not say something of that sort—really, when that sort of accusation is brought, it is not a thing with which anybody can deal in a Budget Debate.

Mr. MacLAREN: My right hon. Friend did not say so.

Mr. McNEILL: Perhaps he did not say so in terms but he seemed to imply it. An hon. Member yesterday certainly said very distinctly that he attributed the responsibility for the stoppage in the coal trade to the Chancellor of the Exchequer. I do not like to make any sort of accusation against the right hon. Gentleman the Member for Colne Valley in his absence, but I should have had no hesitation in doing so had he been present. I have no doubt in my own mind, from what the ex-Chancellor of the Exchequer has written and said, that a very much large responsibility rests upon the right hon. Gentleman the Member for Colne Valley, because he has publicly stated that, while during the progress of the stoppage he took the strongest possible view as to the folly and iniquity of the policy adopted by the leaders of the movement, he abstained during the progress of the stoppage from expressing his view or using his great influence in order to bring that stoppage to an end, for this extraordinary reason, that he saw the national danger it was doing, and yet he refrained from using his influence to stop it because he did not want to do anything to assist the Government. I think it is hardly generous, not to put
it any higher, for the right hon. Gentleman to come down here anxious to triumph over the Chancellor of the Exchequer and the Government, and obviously disappointed when he finds in spite of the difficulties which would have made him despair, the Chancellor of the Exchequer has managed by insight and ingenuity to overcome those difficulties. [HON. MEMBERS: "Hear,
hear!"] Ingenuity is not a quality to be despised even in a Minister, and I think it would be a very good thing if hon. Members opposite exercised it in a larger measure.
There has been very little said in this Debate with regard to the actual proposals of the Government. One or two hon. Members opposite, including the right hon. Gentleman the Member for Colne Valley have accused the Chancellor of the Exchequer of imposing additional indirect taxation without a corresponding imposition of direct taxation, and they recall the statement made last year that if the coal stoppage was prolonged it would be necessary to propose an increase in both direct and indirect taxation. The right hon. Gentleman the Member for Colne Valley is quite wrong when he alleges that the present Government in the Budget are proposing to put on additional indirect taxation and no direct taxation, because that is not the case at all. On the contrary, the direct taxation imposed, I admit temporarily in some cases, by this Government in order to deal with the exceptional crisis of the present time is much larger than the amount of indirect taxation. To begin with, there is the alteration of the death duties, sweeping away an exemption which has hitherto applied to the life tenants of the settlement, and which will bring into the Treasury £800,000 in a full year. Amendments are being proposed with regard to certain assessments of tax upon interest which again is direct taxation, and will bring in a sum of £350,000 a year. In addition to that proposals will be made when the Finance Bill comes before the House for stopping a good many loopholes by which taxpayers are at the present time escaping the burden they ought to bear, and still more providing against the extension of practices which are at present at work, and the whole result of which will be an increase of direct taxation. I agree that some
of these are only temporary measures, but there is a very large sum of £14,800,000 to be paid to the Exchequer in the present year on account of Schedule A of the Income Tax, all of which is a heavy addition to direct taxation.
Hon. Members may argue that that is really only a windfall, and that it is not recurring taxation and cannot go on in future years, and I quite agree with that contention. We are hoping however that the necessity for this greatly increased taxation will not be permanent, and as we are dealing with an exceptionally unique crisis in our financial affairs, I do not think it is unreasonable in order to meet the necessities of that exceptional time that we should depend upon exceptional taxation.
The only indirect taxation proposed in this present Budget which can really be said to be an impost upon the general consuming public is the small addition which has been put on the Tobacco Duty. I pass over the duty upon pottery, and the addition to the McKenna Duties removing the old exemption in regard to motor tyres, which my right hon. Friend explained yesterday. There is, however, an addition to a duty upon an article of very general consumption in the addition of 8d. to the tobacco tax. I am very happy to be able to inform the Committee, if they have not already seen it announced in the Press, that we now know that that addition to the tobacco duty will not have any effect upon the price of the popularly consumed tobacco, as two of the largest organisations of producers of tobacco have already announced that they will make no difference in price, and therefore it is quite clear, as we anticipated, that the competition amongst themselves will compel the various producers of tobacco to go on supplying the public at the old price, notwithstanding this small addition to the duty.
There are only two other matters on which I should like to say a word before I sit down, because they will, I think, form very important features in the present Budget, and will probably be remembered with gratitude to my right hon. Friend when the immediate additions to taxation have long been forgotten. One is the proposal, which will be embodied in the Finance Bill, for
simplification of the Income Tax, a change which I feel quite certain will be gratefully accepted by the House and by the country. I do not think I need attempt to explain the precise details of that simplification, because it, will be much more convenient that they should be in the form of Clauses of the Bill which hon. Members will have before them. There will be plenty of time then for going into the details, and they will no doubt be discussed by experienced Members of the House. The only other matter is one which has arisen of late years, and about which a great deal was said on our side of the House last year. I referred just now to various devices which ingenuity has discovered for legally avoiding the full burden of taxes. Hon. Members will recollect with interest the notorious case of a late Member of this House who died not long ago in the Island of Jersey; and there are now, I believe, people to be found in the Channel Islands who, if they were resident here, would be contributing to the Exchequer. Of course, there are difficulties, as hon. Members know, in dealing with a matter in which the Channel Islands are concerned, and the Government are going to do nothing which aims in the slightest degree at interfering with or taking away from the autonomy and independence of those Channel Islands, of which they are extremely proud and which they are very well entitled to maintain. The Islands of Jersey and Guernsey are, in one sense, an extremely aristocratic portion of the British Empire. They did not come over with the Conqueror, because they are the Conqueror. They are the sole remaining part, and they are very proud of it, of the Duchy of Normandy, and they think that the adjacent islands of Great Britain belong to them in virtue of their Duke having been the Conqueror.
Therefore, it would be very unbecoming of us to do anything which would be disrespectful to the Islands of Jersey and Guernsey, but, at the same time, we have entered into negotiations, which I am sanguine enough to hope will come to a successful issue, by which the Governments of those Islands themselves will assist us voluntarily to obtain the taxes which we ought to obtain not from those who are residents in the Islands—
who ought not to be interfered with—but from those who have gone from this country, like tax-dodging foxes, and have found earths in Jersey and Guernsey. We hope that the Governments of those Islands will be kind enough to help us to dig out the foxes, and we shall be able then to be in at the death in a financial sense. In the same way, in regard to other devices, with which the House is familiar from past Debates—one-man companies, various forms of dealing with debentures or shares in a company, and so forth—by which taxation is legally avoided, my right hon. Friend, as he announced yesterday, is, after very careful examination, in a position to make proposals for dealing with them. In that case also I think it will be much more convenient to leave these matters until they appear in the Clauses of the Bill, rather than to attempt now to enter into the details, which are rather complicated and difficult to follow, and which I do not think I should be able to explain to hon. Members in a way that would be satisfactory, without their being in print before us. Therefore, I think I had better reserve that until a later stage in our financial Debates. I conclude as I began, by saying that, although we have had a very interesting discussion on various financial principles, quite relevant to the general discussion of the finance of the year and to the actual proposals which My right hon. Friend has put forward for dealing with the particular difficulties of the moment and for surmounting the deficit with which he is faced, the Debate so far has not revealed any general hostility to those proposals, but, on the contrary, has appeared to be a chorus of congratulation to my right hon. Friend.

Sir GODFREY COLLINS: I have often listened to the Financial Secretary defending with marked ability a difficult situation, but I am afraid I cannot congratulate him on his speech this evening, for, as regards the major portion of it. I was inclined to ask myself, "What has the Government been responsible for during the last two years?" The right hon. Gentleman seemed to place the responsibility on other shoulders. I am anxious, however, to pass from his speech and join with other Members in con
gratulating the Chancellor of the Exchequer on his very interesting speech yesterday. The Chancellor of the Exchequer always moves along with great rapidity in Debate He creates a spirit of good feeling, and, although his Budget might be a very unpleasant one for every Member of the House, I believe he would create in the minds of hon. Members a good impression. But, as I listened to his Budget yesterday, my mind went back two years ago to his opening Budget statement in this Parliament, and I contrasted his speech yesterday with the hopes that he held out to the House of Commons and the country two years ago. I am bound to say that two years ago I thought the Chancellor would be an all powerful Chancellor. He was at the head of a Government returned by a large majority to effect economy in every Department of the State; he had a loyal party behind him; and, in addition, he had been himself, over some years, at the head of every spending Department of the State. He had, therefore, inside knowledge, and so, as Chancellor of the Exchequer, should be able to curb successfully the spending power of those great Departments. I thought we should have the classic case of the poacher turned gamekeeper, and that the Estimates he would present to the House year by year would show a substantial reduction.
Two years have passed, and the tale is very different. The date when the Chancellor failed as an all powerful Chancellor was the day when the First Lord of the Admiralty carried through the Cabinet his proposals for cruisers. On that day the Chancellor's battle for economy was lost. Some 12 or 15 months afterwards, having been beaten by the right wing of his own party, he was beaten by Mr. Cook, the left wing of the Labour party. The Chancellor is the victim of the First Lord of the Admiralty and of Mr. Cook. I see that the right hon. Gentleman rather takes exception to that, but his Budgets for the last two years have been shorn of their brilliancy through the Chancellor of the Exchequer giving way to the pressure of the First Lord of the Admiralty and Mr. Cook. When we contrast his promise of two years ago—or rather, I should say, to be more accurate, his aim of two years ago—with his Budget this year, we find some
very striking features. He aimed at reducing the cost of the Supply Services by £10,000,000 a year. If that had matured, instead of the Supply Services this year being £420,000,000, we should have a figure of £387,000,000, or a total reduction of £33,000,000 a year. Earlier in the afternoon, the right hon. Gentleman the Member for Norwich (Mr. Hilton Young) dealt fully with the question of economy, and sketched out to the Committee an inside Financial Council of the Cabinet. He thought that that would be the best way to effect the economies which we all desire. I desire, however, to accept the challenge of the Financial Secretary to name specific services which could be cut down. I will draw the attention of the Chancellor of the Exchequer to only four cases in which he could take action with the approval of the country, and which would reduce the cost of the Services this year by a very large sum of money.

Mr. McNEILL: How much?

Sir G. COLLINS: I will come to that. Colonial Preference will cost the country £4,500,000 this year. Why should the poor, over-burdened taxpayer assist the successful planter in the Dominions this year? By the abolition of Colonial Preference this year, the taxpayers of this country would be saved £4,500,000. Then there is the Beet Sugar Subsidy, which is surely quite unnecessary. There is a plentiful supply of sugar in the world coming to our ports from distant places at very low prices. Why should the taxpayer find £4,000,000 for a particular industry, for particular people, this year? Then take the Empire Marketing Board. Why should £1,000,000 of the taxpayer's money be spent this year on bringing to our shores the favoured products of overseas trade? Why should we not allow the Dominions overseas to compete in these markets on equal terms with other people in the world? The other item would be the cost of the Admiralty and the War Office. I reckon that some £25,000,000 could be saved this year by a Chancellor of the Exchequer who would face the true situation, who would realise that the necessity for an all-powerful Navy this year does not exist. The necessity for rebuilding our Fleet, to which the Chancellor referred in his speech in the country some months ago,
does not exist to-day, especially in view of the Conference to reduce the cost of armaments which may be held during the course of the next few months. The addition of these four sums amounts to £34,500,000, and I believe it, is well withing the range—

Mr. McNEILL: Is that the policy of the Liberal party?

Sir G. COLLINS: The policy of the Liberal party in these matters will be made quite clear before the Debate concludes, and in good time before the next election.

Mr. McNEILL: After all, the hon. Gentleman, who says he is in favour of adopting these various proposals, is a distinguished Liberal, and I think we are entitled to know now whether he is speaking merely for himself, or whether he is speaking for the Liberal party.

Sir G. COLLINS: I do not in any sense of the word desire to speak except for myself in this House, and the interruption of the right hon. Gentleman seems to me to be unnecessary. If one had held my office in the councils of the party, or if one were an ex-Minister, it would be another matter; but, in all seriousness, from the point of view of the over-burdened taxpayer, these items are really quite unnecessary and uncalled for this year. I have only directed the attention of the Chancellor of the Exchequer to four items, by which alone I think he could save some £34,000,000 this year. Then I intended to ask this further question: Are we paying our way this year? How far has the Chancellor secured his surplus? He has raided the Road Fund to the extent of £12,000,000. He has made the Schedule A Income Taxpayer pay more quickly, and the brewers pay earlier. He has discounted the future to the extent of £19,000,000.

Mr. CHURCHILL: No!

Sir G. COLLINS: I understood the right hon. Gentleman had shortened the terms of credit to the brewers, whereby he got £5,000,000 more this year than he would otherwise have got.

Mr. CHURCHILL: I have in no way forestalled the revenues of future years.

Sir G. COLLINS: This £5,000,000 would have remained in the pockets of
the brewers if the Chancellor had not stated his new policy yesterday. Therefore, I think I have practically stated the fact that he has discounted the future to the extent of £19,000,000. How far his Revenue has benefited through the sale of war stores, I am unable at short notice to find out, but we have, according to the Blue Paper, special receipts of £27,500,000. Then we have receipts from sundry loans of £23,500,000. How much these figures contain of capital assets, sales of capital assets or sales of capital assets through foreign countries, I do not know, but, at any rate, I have made it quite clear that a large portion of his surplus has not been taken by way of taxation through the pockets of the taxpayer this year, but he has either raided other funds or discounted future surpluses for future Chancellors. I think that is a serious situation for any Chancellor of the Exchequer.
I myself think that the Chancellor's policy during the past two years has lowered the financial credit of Great Britain. It is a grave statement to make, but I make it in all seriousness. He has raided every fund he could think of. He has discounted every bill on which he could lay his hands. Wherever he has seen a surplus, he has raided it. Wherever he could discount a bill for the future, he has cashed it, and with all that Parliamentary ability which, I think, is unique in this Parliament, and with all his skill, he has glossed over the mistakes which he as Chancellor has made. I think the Chancellor of the Exchequer has not only lowered our financial credit, but he has also handicapped every public economist in every public body in Great Britain. This country pays taxes to the extent of some £800,000,000. In addition, there are the great local authorities in this country who are raising this year by rates some £180,000,000. We have had a Chancellor who has been profligate in expenditure, who has not curtailed the spending Departments of the State, who has, by his policy, I think, tended to keep up the price of money, and so tended to keep up the price of goods, and thereby created unemployment throughout the length and breadth of our country.
He has given subsidies to get over his difficulties. He has given subsidies to the coal trade to get over a temporary difficulty in 1925.I am glad to think
that on that occasion my hon. Friends associated with me divided the House against a wrong subsidy. He violated a principle of sound finance on that occasion. He thought he had bought peace by that subsidy he bought far more trouble as the result of it. Although I am not going to prophesy as to the future, we have his two Budgets which stare us in the face, where he held out hopes of large surpluses which have not come true. He has failed as a Chancellor to curtail the spending powers of the Departments. He has placed on every taxpayer an undue burden this year. No wonder the country during the last few months has watched with growing concern and grave anxiety the path of the Chancellor of the Exchequer.

Sir FRANK NELSON: I desire wholeheartedly to congratulate the Chancellor of the Exchequer on what I consider is an absolutely unique Budget. I think he has helped the country to surmount a financial obstacle with consummate ability. I have heard the right hon. Gentleman introduce three Budgets, and I have heard the right hon. Member for Colne Valley (Mr. Snowden) endeavour to attack his position on three occasions. I was interested and impressed yesterday to note that the right hon. Member for Colne Valley seemed to lack energy and enthusiasm in his attack. I am convinced it was because there is very little to attack in this particular Budget. After all, every Chancellor must take risks of some sort in a Budget. Every Chancellor, except in very fortuitous circumstances, is bound more or less to make his Budget a gamble in some way. The Indian Budget has for years been a gamble in rain, and this Budget may, perhaps, be said to be a gamble in the price of money. After all, the right hon. Gentleman is not alone in his difficulties. It must be remembered that the French Budget is 1,200,000,000 francs above that of the previous year. Italy is 400,000,000 lira in advance of 1925–26, and Germany is 400,000,000 marks in excess of 1925–26. I agree with the Financial Secretary to the Treasury when he stated that the course of the Debate up to now has had very little reference to the actual terms of the Budget.
I do not remember that a single reference has been made to the Betting Tax. I disagreed very much with the
incidence of the Betting Tax, and I disagree now more than ever. I could have wished that the Chancellor had held out some hope of revising this incidence. I also disagree with the Road Fund being expropriated in the way proposed, but I disagree still more with the alternative which faced us. There are two constructive suggestions I wish to put before the Financial Secretary to the Treasury, in the absence of the Chancellor of the Exchequer. Between now and 31st March, 1929, there is no less than £620,000,000 of debt maturing, and there is, I believe, in this financial year about £178,000,000. I think the right hon. Gentleman will agree with me in the task which faces the Chancellor there is more possibility of making a substantial saving by means of the rate at which we convert the debt that falls due this year and next year than in any other direction. I do not want to be taken for a moment as putting forward a suggestion which might be called a plea for Premium Bonds, but Victory Bonds have been described by many prominent people as a form of Premium Bonds. They were, as the right hon. Gentleman very well knows, issued at 85 carrying 4 per cent. interest; they are repayable at par, and drawings take place yearly. I think I have stated it reasonably accurate. They appeal to the imagination of the investor. I wish to state very definitely that I am in no sense putting forward the suggestion that in any conversion loan this year or in the future Premium Bonds should be considered as such.
But, after all, I think it is a reasonably fair statement to make that Victory Bonds, as issued, are, in a sense, premium bonds. The Select Committee which sat in 1917–18 examining the question of Premium Bonds, examined 35 witnesses, most of them leading bankers, leading economists, chief constables and so forth: 18 of those witnesses were definitely in favour of the ordinary premium bond loan, 12 were definitely against, and five were neutral. I submit that in the next Conversion Loan which the Chancellor may have to offer to the public he should endeavour to make it a national movement and extend the principle of Victory Bonds, thus appealing to a type of investor of which we are badly in need. I, as an old banker, have observed with ever-increasing interest the almost uniform increase in profits of all banks, and
I am confident they would lead in any national movement designed to make the next Conversion Loan an outstanding success, and, in the right hon. Gentleman's own words, exceptional times demand exceptional methods, and if there was any time when exceptional methods should be considered, it is surely when it may be the duty of the Chancellor to put forward the next Conversion Loan.
I have only one other point to which I want to allude, and it is one to which allusion has already been made more than once in this Debate. It is the complete lack of machinery giving Parliamentary control over national expenditure, and I desire to associate myself with the right hon. Member for Norwich (Mr. Hilton Young) in congratulating the Public Accounts Committee and the Estimates Committee on their very self-sacrificing labours. I heartily endorse his remarks in this connection, but I differ from the right hon. Member for Norwich in so far as his solution of the economy problem was a sort of Cabinet within a Cabinet. I differ from that with all the strength at my command. I think we have enough Cabinets. But I do most emphatically suggest, in the right hon. Gentleman's own words again, that in these exceptional times exceptional methods should be adopted. Why not widen not only the personnel of the Estimates Committee but their terms of reference? I am putting forward hypothetical instances, but let us assume the Chancellor of the Exchequer for the time being is resisting the demands of one of the heads of the big spending Departments—if he had an Estimates Committee consisting of some 25 to 40 private Members of all parties behind him, his hands would be considerably strengthened in withstanding any undue expenditure—always assuming he and the Committee agreed.
8.0 p.m.
I have examined the annals of this House exhaustively and I find that, year after year, this suggestion I am putting forward has been put forward in one guise or another, and immediately and emphatically turned down. I do not think that is any reason why at a time like the present we should not continue to press the suggestion, because if year after year it is put forward in this way, it means that the demand is consistently there for it, and I am sure this year it is in a stronger form than ever. I hope the Chancellor of the Exchequer is not
in any sense under-estimating the really strong demand for economy throughout the country. The economies foreshadowed in his Budget will not be sufficient to defend or exempt him from the gruesome task, which will be his next year, of endeavouring to surmount another deficit, unless in the meanwhile he is successful in curtailing expenditure generally. I hope that he will, if I may say so, from time to time re-illuminate, as it were, the writing on the wall, remembering, at the same time, that there can be in no sense true economy without at the same time wise expenditure.

Mr. TOWNEND: I am sure that the public will be gratified, when reading the speech of the Financial Secretary to the Treasury this evening; to know that so far as the duty on tobacco is concerned it will not, on this occasion, be passed on to the consumer, but that, for the first time, those who hitherto have passed it on are prepared to accept responsibility for whatever additional revenue the Government may derive from its application. It will be quite a new departure in the management of business affairs, and I sincerely hope that before we are very much older, although I doubt it, there will not be reason for fearing that the implication of the reference to this matter made by the Financial Secretary has not materialised. I did not rise, however, to deal with the question of the duty on tobacco. I desire to speak on another phase of the statement of the Chancellor of the Exchequer, in reference to the abolition of certain Departments. One of his prophesies was made in such a way that one really began to wonder whether either he or the Government appreciated exactly the implications of their action in reference to the abolition of the Ministry of Transport. It appeared that the Chancellor of the Exchequer seemed to think that all that was required in this matter was simply a passing reference; that the question only needed to be referred to, and that the effects would be very small indeed. That is a point of view of mine which his very brief reference quite justified.
The Prime Minister,
he said,
has authorised me to announce a decision with respect to the other three post-War
Departments. During the present financial year, arrangements will be made to abolish the Ministry of Transport …"—[OFFICIAL REPORT, 11th April, 1927; cols. 71, 72; Vol. 205.]
From that point to the end of his statement no further reference was made to this tremendous change—a tremendous change so far as it affects a very large proportion of the population of this country. We have had additional references to it on the Government side by the Financial Secretary to the Treasury, this afternoon, when he suggested that the aim of the Government in abolishing the Ministry of Transport was to effect some economies, although he did not give any indication at all as to what those economies might be, or as to their magnitude or otherwise. The only indication of a tangible character that I have heard during the whole Debate was contributed by the right hon. Member for Colne Valley (Mr. Snowden), this afternoon, when he suggested that the full amount of financial satisfaction from the action of the Government might pretty well be embodied within £10,000. If that be true, and if that be the object of the Government in the step they are taking in abolishing this Ministry, I say that the disadvantages of its abolition far outweigh the advantages. It may be, as has been suggested, that this action is a sop to the stunt-mongers, and of no importance to anyone else; and that, as long as a certain section of the Press receive a satisfactory response from the Government, no one has to pay the price. I suggest something quite different. The effect of this abolition will be far-reaching among a very large portion of the community. I do not know what satisfaction the Liberal party derived from the authority quoted by the Chancellor of the Exchequer, when he stated that this had the benediction of the late Leader of that party, who is now to be found in another place.
I want to complain of the very flippant way in which this huge and important Ministry, which carries on a very important section of Government work, has been dispensed with in a very few words and without any further explanation from the Chancellor of the Exchequer. I would remind the Government of what took place at the setting up of this Ministry. It is not a small Department; its ramifications are very
wide; they extend throughout the length and breadth of the community, particularly the industrial section. Contrast the attitude of the Chancellor of the Exchequer with what transpired subsequent to the many inquiries made on this question of transport during the years of the Great War and those immediately following it. What did the Minister say who introduced the Bill setting up this Department, which is now of such small significance and such small importance? In the first place it was a Bill to establish a Ministry of Ways and Communications, as it was originally described. It was subsequently merged into the Ministry of Transport, as we now know it. The Home Secretary in those days (Mr. Shortt) said:
I do not think it is any exaggeration to say that probably no question is of more pressing importance to the country than is the question of transport and communication. You cannot develop any industry in this country unless you have adequate facilities for transport and unless you have cheap transport."—[OFFICIAL REPORT, 26th February, 1919; col. 1820, Vol. 112.]
There he indicated, as I say, the ramifications of this Ministry. The present Home Secretary followed. He said:
The right hon. Gentleman"—
referring to the Minister who introduced the Bill—
has given us a speech on, I think, the most powerful Ministry that it has ever been suggested to set up in this country. A single Ministry which is to control the roads, canals, railways, bridges, vehicles, and traffic regulations of this country, which I presume includes the whole of London as well, and in addition to that is going to be responsible for the supply and control of electricity, and, as we are informed in reply to a question, is also to have the Manchester Ship Canal thrown in as a little extra, will need its Minister to be a super-man. He will need to be a very great man, and I almost think it would save the time of the Government if they included in the Bill the provision that the Minister for Ways and Communications should also manage the whole of the affairs of the country."—[OFFICIAL REPORT, 26th February, 1919; col. 1824, Vol. 112.]
What has happened to cause this change in the attitude of the Government towards the Ministry of Transport? What has taken place in the meantime? I suggest that, so far as the indication given by the Chancellor of the Exchequer is concerned, very little regard is being paid to the public interest in handing over or, maybe, dividing and distributing between different Depart
ments, this very important Ministry of Transport. The very important Committee set up in 1918 by the Government to inquire into the whole of this question, in their Report went dead against the intention of the Government, as voiced by the Chancellor of the Exchequer to-day. They said that the distribution in the way indicated was harmful to the interests of the country, and they suggested that the powers which were subsequently given to the Ministry were of extreme importance. Just imagine the field which the Ministry of Transport has to cover. It takes over the decision of all matters affecting the railways from the Government point of view, the light railways, tramways, canals, waterways, roads, bridges, vehicles, harbours, docks and piers. In addition, 18 very important Acts, which were operated by other Departments, were concentrated under this one Ministry, and they were called on to administer further numerous small Acts. They were equally empowered to give effect to the Electricity Supply Act, 1919, the Electricity Supply Act, passed last year, and the developments in connection therewith. That Act was discussed last year for a month upstairs, and subsequently for days it furnished material for discussion on the Floor of the House. That Act was also considered to be the work of the Ministry of Transport, and it alone involved an expenditure of £33,500,000 of public money. In the opinion of certain authorities, by the time 1940 had arrived, it would have meant that possibly the Ministry would control the expenditure of the taxpayers' money to no less an amount than £200,000,000. If it was important in 1919 that all these varying Departments should be concentrated together under one head, surely, in the light of the additions that have been made to the Ministry in the interim, it is considerably more important in 1926. And yet without a word of explanation we are to be told that this Ministry is once again to be divided and may be under one Department or another, and huge combinations and groups are to find different questions dealt with in different kinds of ways. In addition, the point was emphasised at the time the Ministry was set up that the setting up of such a Ministry would have an influence upon our foreign trade. We have had many complaints during the last two or three
years about the decline of our foreign trade and how the balance of trade is going against us. I want to quote a letter that appeared in the "Railway Gazette," the official organ of the railways, in 1922, indicating the value of the Ministry of Transport, and the necessity of it as it affected our foreign trade:
Another example of such matters is the case of the Orient Express. There are two routes, one of which is the shorter and more direct, but transit by it is stopped at Vienna owing to existing international conventions. If a passenger wants to go beyond Vienna he has to find another train. If a trader wants to send goods beyond Vienna, bulk has to be broken. On the other hand, if a continuous journey is wanted the other route is taken and it is some 500 miles longer. The difficulty would probably not have arisen if the Ministry of Transport had been in existence at the time the conventions were framed, but the Ministry are now trying to obtain freedom of alternative routes both for goods and passengers.
I only quote that as an indication of the effect a watchful Ministry of Transport has upon our foreign trade, a watchfulness which cannot be expected from another Department which, particularly bearing in mind the safeguarding of industries activities of the Chancellor and such like questions, will consider transport questions hitherto dealt with by the Ministry of Transport as of secondary importance.
The attitude of the Chancellor on this point has left in the mind of many of us a spirit of uneasiness. Surely a little vision would have indicated to him the necessity of the continuance of this Ministry. He must know that in the industrial world there is a transport war very near indeed, connected with which half-a-million road workers with their families will be involved. On the other side, we have the railway group, who from their particular angle will be compelled to take part in this terrible menace to their very existence because of the development of road transport. There will be a clashing of interests which will require the whole time of a Department to reconcile if the people of the country are going to emerge from such a position in a satisfactory way. It cannot be left to some little back office in the Board of Trade to devote a little spare time to it when they have already to deal with questions which would take far more of their time if they were to give satisfaction.
A further point is the development of road transport. We have a draft Bill submitted by the Ministry of Transport. Is it the intention of the Government to go forward with that movement? How are they going to develop it? When that is developed, when all the varying interests are reconciled, to whose Department is that going to be relegated? It will not do simply to indicate the abolition of a Ministry such as this in the way they have done. We want further information, and we want to have indicated to us what advantages the Government are going to have from such a move. Up to now it appears to us that the disadvantages far outweigh the paltry monetary advantages which were referred to by the right hon. Gentleman the Member for Colne Valley (Mr. Snowden).
There is another point I want to mention. One of the monuments that stand to the credit of the Ministry of Transport is the Railways Act of 1921. Within that Act there lies machinery which has been extremely useful during the last five or six years. A short time ago the Prime Minister was appealing for industrial peace. The right hon. Gentleman the Member for Norwich (Mr. Young) referred to the apathy of those who produce that which is necessary for the welfare of the country. There is apathy abroad. There must be some new force generated. There must be some more energy generated if the affairs of the country are to take an upward trend. Within the Railways Act of 1921 there is machinery which, particularly during the last nine or ten months, has been extremely useful in developing the spirit from which springs industrial peace, a machinery which is lacking from most other industries. The general strike last year left an aftermath of bitterness which has not been at all helpful in developing the spirit of peace so necessary to the prosperity of the country, and that bitterness was felt in the railways of the country. But because of the machinery which brought both sides together, although in other industries there may be still, and is, a continuation of this bitterness, to a large extent that has been eliminated from the railway industry, largely owing to the foresight of those who by laying down the machinery of the Railways Act brought together both sections of the industry.
In as much as that work has not been done in others, there is plenty of room to create and raise other monuments in other industries that the Ministry of Transport controls, because the Railways Department of the Ministry is not the only Department with which they are concerned. They control industries that affect the lives of something like 2,000,000 workers with their families. Surely because of that, because of the huge interests involved and because of the magnitude of the work that still lies before this Ministry, the Government will reconsider this matter before they bring in the proposed legislation to abolish the Ministry and will endeavour to find some other way of achieving the object they so much desire.

Sir EDWARD ILIFFE: I should like to congratulate the Chancellor of the Exchequer on the ingenuity and courage which he displayed in framing his Budget, because it required a good deal of courage to budget for a Sinking Fund of no less than £65,000,000. I should also like to say how much I appreciated his proposals in regard to the simplification of the machinery for the collection of Income Tax and Super-tax. These proposals have been for many years brought forward by the Association of British Chambers of Commerce. I am very glad to know that our system in connection with Income Tax and Super-tax is to be much more simple in the future than it has been in the past.
I was sorry to hear the Chancellor of the Exchequer state that the Prime Minister had decided to abolish the Department of Overseas Trade. That Department was created at the request of commerce and industry, and it has functioned with very considerable success. I should like to say to the Financial Secretary to the Treasury that I am not a recent convert to this view. For the past four years I have stated on every possible occasion that the Department was doing most admirable work. There can be no doubt that it has definitely assisted in the development of trade. Other, countries with whom we compete have similar departments, and it seems to me that it will be absolutely necessary for the trade of this country that the work of that Department shall still be carried on under another Ministry.
I also regret that it has been decided to do away with the Ministry of Transport. Unless some of the work performed by that Ministry is to be abandoned, I cannot see that there is any real economy in doing away with the Ministry. We were told, and I was very glad to hear it, that the Road Department would still continue to operate with its full activities. I regret also that the Chancellor of the Exchequer has felt it necessary to raid the Road Fund: but there was some little consolation to be derived from his speech, because he said that he would put the £12,000,000 which he was going to gain from the Road Fund in the category of a windfall, and a once-for-all receipt. I sincerely hope that that will be the case. If we have co-operation between the employers and the employed, which we all so much desire, the standard of living in this country is going to increase, and we shall see many more motor cars upon our roads, and I do fee] that to-day we require a definite national road programme.
The present system of allocating road grants is unsatisfactory. This matter ought to be left to the Department concerned. The Chancellor of the Exchequer should decide what amount the country can really afford to pay for its roads, and the Department concerned should decide how that money should be paid. I hope that it may be, possible to agree that a certain portion of the Road Fund in future years should be earmarked for the service of interest and sinking fund on loans for the construction of arterial roads. It would pay us to construct arterial roads at the present time before the land through which those roads pass is built upon. It would be far better to meet that expenditure to-day than to postpone it, as we must do, if the cost has come out of the current year.
I should like to say a few words in connection with co-operative societies and Income Tax. I am sorry that the Chancellor of the Exchequer has not taken this opportunity of imposing upon cooperative societies the same Income Tax payments as is imposed upon their competitors. [HON. MEMBERS: "He does!"] In stating this point of view, I would not like any hon. Member to think that I am in any way opposed to the system of co-operative trading. It is a perfectly legitimate form of private enterprise, and my only feeling is that no branch
of enterprise should enjoy advantages which are denied to its competitors. Cooperative societies are, I believe quite wrongly, charged with evading Income Tax. They do not, in fact, evade Income Tax, because they actually pay the whole tax which the law demands they should pay. I feel that they should be required to pay exactly to the same extent as their competitors.
The co-operative societies have increased enormously in recent years. In 1925, the turnover of the wholesale and retail co-operative societies amounted to £278,000,000 an increase of £12,000,000 on the previous year. Last year, the membership reached nearly 5,000,000 persons, and as these members are the heads of households, there must be something like 15,000,000 or 20,000,000 of co-operative consumers in this country which is practically one-third of the whole population. That is, truly, a great business enterprise. It shares in common with other traders the protective and social services provided by the State, and it should be asked to contribute its proper proportion. [HON. MEMBERS: "It does."] The Royal Commission on Income Tax in 1920 recommended that the co-operative societies should in future be treated as ordinary traders, and pointed out that if this were the case the gain to the Exchequer would not be as great as is generally supposed, but that the Exchequer would be a gainer.
The Chancellor of the Exchequer stated a short time ago in the House, in reply to a question, that in his opinion the gain to the Exchequer if co-operative societies were treated as ordinary traders in regard to Income Tax would be £100,000 per annum, and he seemed to feel that that was a sum which it was hardly worth while collecting. I suggest that the Chancellor of the Exchequer has somewhat under-estimated the gain which would be derived from charging co-operative societies with Income Tax under Schedule D. I have gone into the matter very carefully, and have had the figures checked by chartered accountants, and it seems to me that the gain would be more like £500,000 than £100,000. I do not propose to trouble the Committee at this stage with the figures, but I can give the figures if they wish. Whether the figure be £100,000 or £500,000, the result upon the spread of the co-operative movement
would be very slight, because £100,000 is only equal to one-tenth of a penny in the pound on the sales, and £500,000 is equal only to one halfpenny in the pound on the sales.

Mr. KELLY: Could we have the figures?

Sir E. ILIFFE: If the Committee would like to have the figures, I will give them. The gross profits of the retail and wholesale co-operative societies, as disclosed in their own accounts, last year amounted to £22,600,000. From this must be deducted dividends to purchasers. These dividends cannot be regarded as being profits in the usual sense of the term. They are merely rebates to customers; they amount to a lowering of the purchase price. If you deduct the dividends on the purchases from the gross profits as shown, you have an amount of £5,800,000, and you must add to this the sum transferred to reserve, before the profit is arrived at, of approximately £2,000,000. Then the co-operative societies have consistently over depreciated their assets. They allow a much larger depreciation than would be allowed by ordinary traders. That comes roughly to £1,000,000 a year. We must add the taxation paid under Schedules A and B, which according to the Chancellor of the Exchequer amount to approximately £550,000. That gives you a taxable profit of £9,350,000.
This £9,350,000 is distributed partly in interest on share capital. That interest on share capital is, of course, subject to Income Tax, and in order to assist the Treasury, not to assist the co-operative societies, that tax is not collected at its source but the co-operative societies do, in fact, make a return to the Treasury of all sums paid to shareholders in excess of £5 per annum, and then I presume the Income Tax authorities collect any Income Tax which the shareholder is liable to. Therefore this £4,100,000 is already subject to Income Tax; it is payable on that amount, that is when the recipient is liable to Income Tax. Having deducted this £4,100,000 from the taxable profit of £9,350,000 you have remaining a net taxable amount of £5,250,000. A tax on £5,250,000 at 4s. in the £ amounts to 1,050,000. The societies already pay £550,000, so that the loss to the revenue, as I have said, is £500,000.

Mr. McNEILL: Has my hon. Friend in his calculations estimated the number of recipients whose total income would be below the Income Tax limit, and consequently would be entitled to make a claim for the return of Income Tax, and the cost the collection of that would involve?

Sir E. ILIFFE: The. Financial Secretary has not quite followed me. I could not have made myself clear. The balance only deals with the profits which are not actually distributed. I hope I have made that clear. An ordinary business pays Income Tax not only on the profits distributed but on the profits it puts to reserve. I have been dealing with the profits put to reserve, and I have said that the amount which was actually distributed in dividends, £4,100,000, was taxed, but it is only the profits which are not distributed which are not taxed, and the amount of shortage in taxation is roughly £500,000.

Mr. HARDIE: May I ask whether, if the co-operative societies cared to distribute the whole of the profits, over £9,000,000, they would not be taxed on it?

Sir E. ILIFFE: If the co-operative societies distributed the whole of their profits in dividends, they would make a return to the Income Tax authorities of any sum over £5 that was distributed to any shareholder, and the Treasury, if the shareholder were liable to Income Tax, would require that shareholder to pay Income Tax,

Mr. HARDIE: That is what they are doing now.

Sir E. ILIFFE: The point is that the co-operative societies are able to accumulate capital for the expansion of their businesses without paying Income Tax, whereas a private trader has to pay tax on all the capital he accumulates. I should not have dealt with this matter quite so fully if hon. Members had not asked me. The co-operative societies at the present time are extending their business by the purchase of other businesses. The price one pays for a business when purchasing depends on the amount of profits one can retain of the business which is being purchased, and as the co-operative societies can retain a higher proportion of these profits than ordinary traders they can afford to pay a higher price and get a better bargain.

Mr. MORRIS: I do not propose to follow the hon. Member in his discussion of the co-operative societies. It is with fear and trembling that one walks into the temple of high finance and attempts to deal with its mysteries. The one broad fact which emerges from the whole of these discussions is the colossal figure which our national expenditure has reached, and the problem which confronts the Chancellor of the Exchequer and the whole country is how to deal with the great level to which expenditure has reached. Comparing the position with 1913 we find a tremendous difference in the solvency of the country. I take for the purposes of comparison the figures by Sir Robert Giffen for the year 1913. He estimates the national income at £2,400,000,000 and he estimates further that it costs the nation, to live a sum of £1,800,000,000. The Treasury take a further sum of £200,000,000; so that the total expenditure is £2,000,000,000 as against a national income of £2,400,000,000, a saving to the country of about £400,000,000. That represented the tenor of pre-War finance; there was a saving of somewhere in the neighbourhood of £400,000,000 a year. At the outbreak of the War we were the strongest financial country in the world. Our credit stood better than the credit of any other country. Our capital at the outbreak of the War has been estimated at somewhere about £15,000,000,000.
What is the position to-day? The Colwyn Committee estimate the national income at a figure in the neighbourhood of £3,500,000,000. I take the figure given by Sir Robert Giffen as the nation's expenditure in 1913, at £1,800,000,000, and I assume that the cost of living has increased by 50 per cent. It may have increased more than that. That would mean bringing the national expenditure up from £1,800,000,000 to £2,700,000,000. Then the Chancellor comes along and collects another £842,000,000 in his Budget. Compare the expenditure side and the revenue side for 1927, and you have an adverse balance of £42,000,000 instead of a national credit balance of £400,000,000 as in the pre-War position. In addition to that we are the poorer by £7,000,000,000 which represents expenditure during the War. That is the alarming position to-day. I have said nothing of another very appreciable figure of expenditure, which I think the right hon.
Gentleman in his Estimates gives somewhere in the neighbourhood of £150,000,000. That is the burden of local rates. It is another substantial addition to the expenditure, making an adverse balance for the whole year of £192,000,000. That is a colossal difference. Certainly if we were met with a crisis like that of 1914, far from having a capital in the neighbourhood of £15,000,000 we should be on the high road to bankruptcy. That is the serious figure represented by the series of Budgets that the present Chancellor of the Exchequer, with all the great skill and brilliance which everyone admires, has introduced. That is the position to which the finance of the last three or four years has brought the country.

Sir BASIL PETO: The hon. Gentleman surely does not say that that is due to the present Chancellor of the Exchequer? There was the War period.

Mr. MORRIS: Certainly there was the War period. Let me take the Budget of the right hon. Member for Colne Valley (Mr. Snowden). The expenditure for that year was £790,000,000. The figure for the first Budget introduced by the present Chancellor of the Exchequer was £799,400,000. That was an increase for the first year, and there was no coal stoppage or industrial dispute during that year. There was an increase in that year of £9,400,000 in the Budget.

Mr. HANNON: There was the increase in social services.

Mr. MORRIS: The Chancellor of the Exchequer in 1925, in describing his own Budget said, "The result is a disappointing result." Last year the right hon. Gentleman's Budget was not £799,000,000, but £812,000,000, a further increase of something Like £13,000,000. On that occasion, the right hon. Gentleman did not describe the result as disappointing, but said that a strong Cabinet Committee was going to inquire into all the expenses of the spending Departments, and that a Report was to be obtained from them. But this year the expenditure has gone up to £842,000,000, a further advance of about £29,000,000, and the right hon. Gentleman comes here and very aptly describes himself, in the circumstances, as the public executioner. Another serious problem is the problem of the
floating debts. It has mounted in the current year from £704,000,000 to £715,000,000. I do not know what the figure is at the moment, but that was the figure on 31st March. It is an increase of nearly £11,000,000. I am not a financial expert and I am merely taking the argument of the Colwyn Committee. The experts on that Committee were not unanimous, it is true, as to the evil of a large amount of floating debt, but they were unanimous in declaring that the amount was too high for economic safety and that it should be gradually decreased. When we compare the percentage of the floating debt to our total liabilities in the post-War period at the present time, as against the pre-War period, we find that the proportion in the pre-War period was 2 per cent., but now it is 9½ per cent. I suggest that that is far from being a safe margin.
It is little wonder that there is pressure being brought to bear, from the benches opposite and from various quarters, on the Government to retrench. Especially has that been so in the last few days. It is true, as the Financial Secretary has pointed out to-night, that when you come to the problem of economy you are confronted with the fact that no one agrees upon the right source of retrenchment. Indeed we have had good instances of that in the Order Paper in the last week or so and in the Debate to-night. The proposal of the Government to abolish the three Ministries, although it may not mean a very large saving and may result only in transferring some of these officials from one part of Whitehall to another, yet it is a step in the right direction, and one welcomes it as far as it goes. One is glad to see some signs of grace in regard to our colossal expenditure.
The one test with regard to retrenchment must always be whether your expenditure is productive or unproductive expenditure. With regard to the present expenditure, one finds on examination of the amount spent on the service, of the National Debt, plus the fighting services, that that accounts for practically 58 per cent. The social services account for 28 per cent., and other minor services account for some 14 per cent. I think it will be agreed that the greater part, if not the whole, of the expenditure of 28 per cent. upon the social services is productive expenditure.
Of the amount of 58 per cent. on the service of the National Debt and the fighting services, a portion may very well be productive expenditure—a proportion of the service of the National Debt may be productive—but a great proportion is clearly unproductive, that part which goes to serve the foreign debt. I omit, of course, the injustices that may be perpetrated on the poor of the country with regard to the internal debt.
Then there remain the fighting services. A right hon. Gentleman asked to-night whether the Liberal party were prepared—I speak merely for myself—to advocate a lowering of the expenditure on the fighting services. Clearly, we are prepared to recommend that. We are in the same company as the Chancellor of the Exchequer himself. The Chancellor of the Exchequer said in this House, in speaking on the Economy Bill last year:
I am far from thinking that we have completed the task of economy in Army administration. It is imperative that measures should be taken, and if adequate time is allowed I am sure that they can be taken.
Perhaps he has not had the adequate time that he demanded. Then the right hon. Gentleman said:
By making modern weapons and modern organisations substitutes for old weapons and old organisations, and not mere additions, as they too often are, it should be possible, without reducing the national security in the future, to make substantial diminutions in military expenditure."—[OFFICIAL REPORT, 16th March, 1927; cols. 294 and 295, Vol. 193.]
He spoke of the Navy in the same Debate. [HON. MEMBERS: "That was before China!"] He is not making any allowance for China in this expenditure, so we may leave China on one side on this occasion. The right hon. Gentleman then said he was confronted by a new naval programme set out year by year over a long period, which proposed increases in every branch and went far beyond the reasonable interpretation of a one-power standard—that being the standard which he himself, earlier in that speech, had established as being the proper standard. I do not know whether the Financial Secretary to the Treasury will agree that expenditure upon armaments is only to be regarded as a premium for the insurance of the safety of this country. [HON. MEMBERS: "Hear, hear!"] I agree, and then it becomes important to know whether you are paying
the proper premium. The prudent insurer would be as careful not to overpay as he would be not to under-pay and, in arriving at the proper premium to be paid on our insurance of national safety, the proper way is to take the amount expended upon armaments in comparison with the national income. [HON. MEMBERS "NO!"] What other test can you take?

Sir B. PETO: What about national necessity?

Mr. MORRIS: I will deal with national necessity later, but for the moment I am comparing expenditure upon armaments and national income, and I take the period roughly around 1906. If you compare the amount spent during those years with the national income, you will find that the premium paid was round about 2 per cent. This year, taking the expenditure on armaments in comparison with the national income, the percentage works out at 3½. The hon. Member opposite says that national necessity must be considered, and I quite agree. I take the period about 1913 when the premium jumped from 2 per cent. to 3 per cent. It did not, however, jump to 3½ per cent., although that was a period of great peril when we were in imminent danger of war. It was reasonable at the time to expect a premium of 3½ per cent., but it was only 3 per cent.

Sir B. PETO: Would the hon. Member propose to give the ordinary soldier and sailor to-day the pay which they got in 1913? If so, he will get the economy he requires.

9.0 p.m.

Mr. MORRIS: I am not talking about how you are going to apportion the money which you are spending upon armaments. That is a totally different matter. What I am dealing with is the premium which we are paying in comparison with national income and in comparison with the degree of peril with which we are confronted. What I suggest to the Financial Secretary to the Treasury is not that he should go back to 2 per cent., but, in order to satisfy hon. Members opposite, I suggest he should only drop 1 per cent., that is, go from 3½ to 2½, and that would immediately give him a saving upon his present Budget of £35,000,000 and practically
wipe out the whole of his indebtedness for this year. The Chancellor of the Exchequer has prided himself, quite rightly, upon his refusal to fall to the temptation of raiding the Sinking Fund, and he has followed the line of financial prudence in that respect, but with regard to the Road Fund, I would remind him that that is not revenue, but is almost a capital asset of the country. If he takes this £12,000,000 then, in the event of a deficit next year, that sum will not be available to be raided. I am omitting from my criticism on this occasion the injustice which is perpetrated on the rural areas in regard to the Road Fund because I dealt with that subject at some length on the Budget of last year. If the right hon. Gentleman wants retrenchment, he will have to look to disarmament and to the service of the National Debt. He will have to look for retrenchment mainly in the direction of securing peace abroad and peace in industry at home before we can hope to cut down the colossal sum which we are now spending.

Sir B. PETO: The hon. Member who has just spoken has excellently exemplified what has been said from the Front Bench that when you are dealing with economy, everybody wants to economise on those national services in which he is not interested. The Labour party and the Liberal party always concentrate upon a demand for economy in the fighting services, and in the speech to which we have just listened, the hon. Member seemed to omit the fact that the cost of living in the country increased and consequently the value of any individual pound sterling has decreased by 60 or 70 per cent. since the year 1913 which he quoted in comparison with the present year in regard to the Army and Navy Estimates. If we on this side of the House were to propose that we should compare the Education Estimates of to-day with the Education Estimates of the same period, it would surely be reasonable to point out that an eminent committee under the chairmanship of Lord Burnham had decided that, in view of the higher cost of living, an enormous increase in the salaries of teachers must be allowed. Consequently our Education Vote has gone up rapidly and it is only reasonable to suppose that the ordinary fighting
man, the soldier or the sailor, ought to have some remuneration in addition to the shilling a day which he was in receipt of in 1913.

Mr. MORRIS: That was not my point. I was comparing like figures with like—the national income then, with the national income to-day, and the national income to-day certainly takes into account the new valuation of money.

Sir B. PETO: The hon. Member was also using an argument as to the increase in naval expenditure since 1913 and he was leaving out of his calculation the fact that the pay of the ordinary fighting man had been increased owing to the lower value of the pound sterling, which accounts in very large measure for the increase in the cost of the Navy. [HON. MEMBERS: "No!"] However, I do not wish to follow the hon. Member into all the arguments which he used, and I only rise to draw attention to two or three specific points. I wish to make one brief reference to the interesting speech of the right hon. Gentleman the Member for Colne Valley (Mr. Snowden). Towards the end of his speech he referred to the Chancellor of the Exchequer as being an unhappy mixture of Mark Tapley and Micawber. I was reminded of another Dickens character when I listened to his speech, namely, Serjeant Buzfuz, whose recommendation to all barristers in difficulties was, "When in difficulties with your case, abuse the plaintiff's attorney." I do not wonder at his taking that line when I consider how difficult it must have been for him to make a speech in opposition to the Chancellor's Budget of this year. By universal admission, the Chancellor of the Exchequer has got us out of an extraordinarily difficult financial position with a dexterity and an ingenuity which, I am quite sure, the right hon. Member for Colne Valley was envying all the time that he attempted to say the Chancellor was a combination of Micawber and Mark Tapley.
I am in agreement with the hon. Member who spoke last from the Liberal benches to this extent, that the fact remains that we are budgeting for an expenditure of £833,000,000, and in connection with that, in spite of all these ingenious expedients—and I do not use that term in any disparaging way at
all; I think that when you are in a tight place, ingenuity, as the Financial Secretary to the Treasury said, is a characteristic which is eminently necessary and desirable—the right hon. Gentleman has only budgeted for a surplus of £1,400,000. That is almost a negligible surplus with such a colossal expenditure as that for which he is budgeting, and he did not make the slightest reference to what appears to me to be an inevitable increase in expenditure in the present year, namely, the defence of our nationals at Shanghai and the dispatching to China of the forces that are necessary for our defence there. That cannot be a negligible amount, and, therefore, when one sees £65,000,000 allocated to the Sinking Fund, one cannot help being afraid that that sum will never reach the Sinking Fund, because Supplementary Estimates must in all probability be required to meet that expenditure in China. We have also to look at the fact that since the Budget of 1923, when £788,000,000 was the amount, the increase of expenditure is no less than £45,000,000.
In common with other Members who put down their names to Resolutions in favour of the abolition of some of our post-War Ministries, I am naturally grateful for the fact that at least three of these Ministries are scheduled to be scrapped. I am glad of that, not so much from the point of view of what will be the immediate saving, as from the point of view that if these Ministries had been allowed to continue their existence, they would inevitably have involved a further growth of expenditure. You cannot have independent Ministries, with Ministers responsible for them on the Front Bench, without the inevitable tendency to justify their existence, and justifying their existence always means some large additional demands on the taxpayer. But I think other savings could have been effected. Last year I ventured to advocate what I believe is almost the universally accepted opinion of the highest authorities both in the Army and the Navy, namely, the view that the Air Ministry is an unnecessary luxury at the present time, and that it does not add to any material extent, if at all, to the defence and security of this country. If that Ministry were put in with the other
three to be scrapped, we could have allocated air defence, so far as the Army was concerned, to the Army and, so far as the Navy was concerned, to the Navy, and they would have looked after their respective wings without any fear on the part of the civilian population of this country.
I go further. I think the position of the Ministry of Pensions might be considered. It is six years since the late Mr. Bonar Law thought the time had come when, with the diminution of fresh claims upon the Ministry, its work might have been carried on much more cheaply than by having a separate Ministry, and I am of opinion that the interests of the pensioned soldier could be looked after, because they are most of them absolutely stabilised and running their normal course, without the luxury of a special Minister in charge of them, with an Under-Secretary and all the rest which is involved. As regards the Ministry of Labour, to which the Chancellor of the Exchequer made a brief reference yesterday, I remember that he said that hon. Members opposite, if he proposed to scrap that Ministry, would have regarded it almost as a personal matter. I always think it is open to doubt whether the mere existence of a Ministry of Labour is not a permanent invitation to unrest in labour circles. I think it is rather a strike promoter than a strike settler.
With regard to another matter, rather more one of detail, I want to point out where I think there is an excessive expenditure, and that is in that vast expenditure which the Financial Secretary indicated just now in his speech that the Government have specially under their control. I refer to the cost of tax collection. I see from page 9 of the White Paper that the cost of tax collection, so far as Inland Revenue is concerned, has increased between the 1914–15 and the 1927–28 Estimates from £2,138,000 to £6,770,000, whereas the cost of collection of Customs has increased only from £1,840,000 to £4,258,000. I want to call the attention of the Committee to the fact that the cost of collection of Inland Revenue has muliplied in those few years by 3⅙ and the cost of collection of Customs has increased by only 2⅓, and yet we are constantly told by hon. Members on the benches opposite, particularly below the Gangway, that by putting on these small duties, which they regard as
harassing, forgetting entirely the interests of the workers of this country, we are so enormously increasing the cost of collection of the taxes that we are doing no good and, in fact, that we are doing a great deal of harm. I think it is notable that the cost of collection of the direct taxation has increased by over three times, while the cost of collection of Customs duties has increased by only 2⅓. I do not know that those figures really represent how this matter appears to the taxpayer. I am told that in the Income Tax collecting office in the larger of the towns that I represent, the town of Barnstaple, before the War there were six Income Tax clerks, and there are now 25. That would be a multiplication by over four, and I believe that that is common. I am not at all sure that the taxpayer gets value for the money that is spent on this enormous and harassing increase of civil servants engaged in the collection of the taxes.
In all Departments, I believe there is very considerable room for saving, and I would beg the Chancellor of the Exchequer, who said he would look very seriously into this question of saving, and who indicated, without any commitment, I admit, the possible figure of about £8,500,000, that he will specially devote his attention to people with salaries of, say, £3,000 a year, and not to people who have a total remuneration of £3 a year, like the ordinary Territorial soldier whose bounty was proposed to be taken away the other day. I should like to see him begin at the top, and keep pretty much at the top, and not go down to these particular levels where, I am glad to say, at any rate that economy was halved by the giving of an efficiency grant.
That is all I wish to say with regard to economy, but I have a word or two to say as to lost opportunities for the collection of revenue. The first thing I would mention is the question, referred to by the hon. Member for Tamworth (Sir E. Iliffe), of adequate and fair taxation of the great volume of trade done by the co-operative societies. I am not treating it from the point of view of Income Tax, I am merely pointing out that in the course of the last six years that trade has averaged £306,000,000. It is constantly growing, and I have not the slightest objection to that. Year by year they are buying up
businesses—coal businesses, ironmongery, bakery, drapery, and businesses of that kind—and in every case where a business is taken over by the co-operative societies—say, it is a bakery—they naturally, as business men, ask the customers, not only for their orders for bread, but for their orders for all that is required for household purposes. Therefore, when one of these businesses is taken over, it is a far bigger thing, from the point of view of the revenue, than the loss of Income Tax from that one particular business. In addition to this, they have made a definite effort in recent years to capture Focal authorities, particularly boards of guardians, so as to get their orders for everything required for the relief of the poor, and the like.
I am reminded, although my recollection of history is not good enough to remember who said it, of a great military conqueror who said of a conquered nation that he was going to leave them only their eyes to cry with. The policy of the co-operative societies, so far as retail traders is concerned, is to leave them with nothing but Rates and Taxes to pay. They have openly stated that it is their policy to abolish retail trade as it is known in this country, and they claim that in a large measure they have changed the whole system of trade in the country. If they have changed the system of trade, making it, in their own phrase, "trading not for profit but for social service," they can hardly complain if the general body of taxpayers say that it would be only reasonable that they should not object to a change in the taxation system of the country so that by one means or another they should make a contribution to it. I have always admitted—and I have taken deputations to the Chancellor of the Exchequer and to the right, hon. Gentleman the Financial Secretary to the Treasury—that Income Tax is not a method of taxation applicable to this problem, but co-operative societies, who claim they have taken £306,000,000 a year of trade from retail traders who were paying Income Tax, cannot complain if we make some change in the method of tax collection so as to Bring that great body of trade within the area of taxation.
Now I have one word to say with regard to the change in the Match Tax. When I heard the Chancellor of the Exchequer refer to matches, I hoped he
was going to say something which I could thoroughly applaud. I would recall to the memory of the Committee that of the matches in use in this country in the year 1919–20, we only imported considerably less than half the matches that were made here. In the year 1925–26 the figures were almost equal—that is, the figures of the matches made in this country and the matches imported. In the calendar year 1926 the retained imports of matches, stated in lots of 10,000 matches, were 7,656,000. The figures as to home manufacture are not yet available, but in the previous year the quantity was only 6,500,000, and therefore it is fair to assume that we are now importing more matches from abroad than we make in this country. In view of the extraordinary success of the Safeguarding of Industries Duties in reducing the cost of production and the selling price of goods, providing employment and improving our capacity to export, I did hope that the Chancellor of the Exchequer would have told us that instead of charging an Excise duty of 4s. 2d. on matches, and a Customs duty of 4s. 4d., he intended to give a definite advantage to the great body of people employed in the matchmaking industry by making the Customs duty 5s. 2d. and the Excise duty, say, 3s. 2d. That would have given him a substantial increase in his revenue instead of no increase whatever
I am glad the Chancellor of the Exchequer has returned to the House. I would like to say a word now about cinematograph films. I heard him say in his speech that owing to a legal decision films above the standard width were held not to be taxable, and, therefore, he had made a small correction in the Duty—not with a view to any increase of revenue but in order to protect the revenue we already have. The revenue from cinematograph films is in the neighbourhood of £240,000 a year. The basis of the taxation is so much per linear foot of film. All the other McKenna Duties were calculated on an ad valorem basis. At this distance of time, I do not remember what arguments were adduced in favour of charging films at so much a linear foot, but I would point out that between 1915 and 1927 this industry has grown beyond anything that anybody could have anticipated, and it has grown, in the main, in the direction
of producing in America costly films, which are exported to this country. It is perfectly obvious that the number of linear feet of film imported bears no relation whatever to the real value of the films imported. The value of a film depends upon its value for exhibition to the public. All the films sent over from America are invoiced to subsidiary companies in this country at very high prices in order that those subsidiary companies should not show any large profits on which the Chancellor of the Exchequer can claim 4s. in the £ Income Tax. I do not complain that they have done that; it is only an ingenious use of the absurd system of taxation per linear foot. They are only charged at 1d. a foot, good, bad or indifferent. Before I heard the Chancellor of the Exchequer, knowing that he was in want of money, I hoped that he would have said: "Here are five or six millions pound a year in profits going out of this country to America and escaping income Tax and, because of the foolish method by which this tax was originally arranged, I cannot claim anything more than this paltry quarter of a million import duty." If he had put a duty of 33 and a third per cent. on the ad valorem value of the films, like the other McKenna Duties, the American producer would have been in a dilemma, and would have said to himself: "If I am going to charge a very high invoice price to my subsidiary company, I shall have to pay a good deal through the 33⅓ per cent. on the invoice price. On the other hand, if I charge a very low price, my subsidiary company will make a very large profit, which will pay a large Income Tax to the Chancellor of the Exchequer." If my right hon. Friend had lost on the swings, he would have got it back on the roundabouts. I cannot understand why he did not adopt that policy, which would have meant that he would have got at least £1,000,000 out of films every year instead of £200,000.
I would like to refer to the question of the Road Fund. Two questions are involved in the way the Road Fund is dealt with. There is the £12,000,000 reserve, which the Chancellor of the Exchequer has expropriated. I am not going to use the words "loan'' or "rob," which have been used in the Debate. He has expropriated this money, and I think
he is perfectly justified in doing it. It is a once for all revenue, as he says. There is another side to it. He has taken over the entire charge of the Road Fund for the future, and he told us that so rapidly is it growing that he estimates it at £24,100,000 in the present year. Out of that sum, which he has also expropriated in perpetuity, he is going to give out this year £19,500,000. That means that, for every car which is taxed by a licence of £25 a year, £20 goes to Road Fund purposes and £5 to general national expenditure. I do not complain of it, but I want to emphasise that this is a direct addition to the direct taxation upon the richer classes of the country and, when we have these comparisons made between the direct and indirect taxation, I want this extra £5 a year on licence duty, which is paid to the Chancellor of the Exchequer, taken into account. I am very glad to see the Chancellor of the Exchequer agrees with me.

Mr. CHURCHILL: Cordially.

Sir B. PETO: I welcome the simplification of the Income Tax for one reason which has not yet been given. It is very desirable that everybody should know just what incomes of different amounts pay in Income Tax. In this Debate to-day, reference has been constantly made to the Income Tax as 4s. in the £. It is nothing of the kind. Income Tax and Super-tax are parts of the same tax. They are going to be one tax, and everybody will know the honest truth, that the man with a big income pays a great deal more than half that income to the Exchequer.

Mr. T. WILLIAMS: I was very interested in the speech of the hon. Member who has just sat down. He invites the Chancellor of the Exchequer, not only to cut down the Mines Department, the Overseas Trade Department and the Ministry of Transport, but he suggests that the cause of all our industrial troubles is the existence of the Ministry of Labour. Therefore, if we want industrial peace, all the right hon. Gentleman has to do is to take steps very quickly to abolish the Ministry of Labour and with it all industrial unrest. Then he suggests that the Chancellor of the Exchequer ought to be more definite in
his plans for obtaining new taxation. For instance, he declares that, instead of the infinitesimal tax on matches, the Chancellor of the Exchequer ought to impose a far greater tax, not only for the purposes of revenue but for the purposes of enabling home producers to have a great deal more work than at the moment. I do not know if he remembers that one Chancellor in the past, Robert Lowe, who introduced a tax upon matches, found himself facing such a hostile opposition that they not only rejected the proposed tax upon matches but they rejected the Minister who had dared to introduce that tax. History may repeat itself and the right hon. Gentleman may find himself, even with this very small tax, rejected in the near future as a result of this further imposition upon the working class.
The hon. Member also said that there was one further means by which the Chancellor ought to be able to augment his funds. Instead of having £250,000 or £200,000 that he estimates from imported films, he ought to go for the big thing and secure £1,000,000 and reduce the profits that are finding their way over to America. If the Chancellor proceeded on the lines indicated by the hon. Gentleman, I do not know how long he would be Chancellor, neither do I know how long the Government he represents would he permitted to remain. The hon. Member made another rather original proposal and suggested to the right hon. Gentleman that a real source of income would be to tax co-operative profits. The hon. Member who represents the Tamworth Division (Sir E. Iliffe) and he have paid the co-operative societies of this country some of the finest testimonials that I have ever listened to and it seems to me their one complaint against the co-operative societies is that they have so well managed their own business, their development has been so rapid and successful, that they are becoming a menace to private traders who have not yet learned the rudiments of sound business.

Sir B. PETO: That was not really the line of my argument at all. I did say they had been extraordinarily successful. My one point was that, as the measure of their success was that a volume of trade which had formerly paid tax was being continuously and increasingly withdrawn
from the province of the tax-paying industry of this country, by some method they should be perfectly willing to contribute to the general cost of the country.

Mr. WILLIAMS: That only confirms the statement I made that the complaint of the hon. Member was that the co-operative movement had been so successful in managing its own business that its increase has been phenomenal during the past few years. It seems to me that the very success of the co-operative movement indicates at least that we ought not to attempt to discourage that movement, but encourage the one bright speck in the commercial horizon of this country. I listened to several speeches this afternoon, and I was particularly interested in the speech delivered by the right hon. Gentleman the Member for Norwich (Mr. Hilton Young), who built several castles in the air, only to knock them over again. The right hon. Gentleman stated that one thing this nation requires before we could hope for any sort of industrial or commercial prosperity was that we should apply economy in a very vigorous fashion, and he proceeded to say that we could only do that when we possess the necessary and requisite knowledge as to where economies can he effected. The right hon. Gentleman also paid a great compliment to the Public Accounts Committee, and stated that they were merely conducting a post-mortem examination, and they could do little or nothing as far as economies are concerned. The same right hon. Gentleman also paid a compliment to the Estimates Committee, and said that they also were very largely conducting the post-mortem examination, and the Departments could hardly be expected to economies because they were ceasing to obtain increased efficiency rather than economy.
The right hon. Gentleman the Member for Norwich said that a Minister, as a rule, knows too little about his own Department to be able to impose economies, consequently, we can hope for little or nothing in the direction of economy from the Minister in charge of any Department. The right hon. Gentleman also said the Cabinet was too large and comprehensive, and they had not the power to impose their will upon the various Departments, although he admitted that the Geddes Committee did perform a very great function for the nation when they
sat in 1921, and said that a Geddes Committee at this moment would be a nuisance for the purpose we have in view. The right hon. Gentleman went on to suggest that the one possible means whereby economies could be effected would be to have a Cabinet Finance Committee, consisting of about five persons, who should have full power to effect economies, as and when they required it, in any particular Department, and he thought that was the one possible hope this nation had of reduction on the world of finance. I should like to have asked the right hon. Gentleman the Member for Norwich, had he been in his place, how he would have expected this Committee to deal with the accounts submitted yesterday by the Chancellor of the Exchequer. I notice that the charge for National Debt services, together with the cost of the Army, Navy and Air Force and the amount required for carrying on the Postal Service, and £12,000,000 for the collecting of the Income Tax, cost no less than £530,000,000 out of a total of £833,000,000, leaving £245,000,000 for health services, pensions and, indeed, all the rest of the Civil Service. Would the right hon. Gentleman the Member for Norwich deal with £530,000,000 or would he confine his efforts to the £245,000,000? After all, that is the problem which the present or any successive Chancellor of the Exchequer has got to face, and when hon. and right hon. Gentlemen opposite are pleading for economy it seems to me that they very wisely and discreetly avoid any mention of the particular Department where they feel economy ought to be practised.
One reads day after day newspapers where in one column they are demanding that economies ought to be effected on a very large scale, whilst in the adjoining columns the same newspapers are pleading for more soldiers or sailors to be sent to China or to Timbuctoo. These newspapers state that economy is required, although they are constantly pleading for more expenditure which is not productive, but of a useless character. I feel that a majority of hon. and right hon. Gentlemen opposite who are pleading so much for economy know full well that the two sources where economies could be effected without endangering our social services are not likely to be touched by any Conservative
Chancellor of the Exchequer. We have £370,000,000 to pay for National Debt services this year. We have heard something about the conversion operations which have been practised during the past 12 months. The right hon. Gentleman the Member for Norwich said that he thought the Chancellor of the Exchequer was wrong in attempting to deal with the Sinking Fund as he is doing, and he lamented the fact that the right hon. Gentleman was setting aside £65,000,000 this year for the purpose of the Sinking Fund. I wonder if the right hon. Gentleman realises that during the next year or two that vast conversion operations have to be taken in hand, and if the Chancellor of the Exchequer had not set aside £65,000,000 this year the effect upon the conversion operations would be to make the position of the Chancellor of the Exchequer almost an impossible one. Instead of doing what we have been doing during 1926 and 1927, that is, paying £23,000,000 instead of the original £50,000,000, we ought to do as the Colwyn Committee recommended, that is, make a much larger contribution than we have done during the last year or two.
I see little or no possibility, unless the Chancellor of the Exchequer is going to do something of a drastic character with the National Debt, and unless he is going to take the hint that the present. Prime Minister handed on gratuitously in 1923 when he suggested the possibility of reducing the interest on all the National Debt by at least one per cent.—unless the Chancellor of the Exchequer is going to do something on those lines and compel large reductions to take place in the expenditure of the Army, Navy, and the Air Force he is not going to get his £10,000,000 or £15,000,000 per annum as easily as hon. Members opposite are expecting. The Chancellor of the Exchequer yesterday, in commencing his speech, attributed the financial position of the nation almost wholly to the dispute in the coal trade in 1920. I should like to remind the Chancellor of the Exchequer and hon. Members opposite that the coal dispute of 1926 was merely the effect of what had been taking place during the five years that preceded 1926. Those hon. Members who will carry their minds back to 1921 will remember that the miners were then locked out and
compelled to suffer wage reduction amounting to £2 per week per man. [An HON. MEMBER: "Were they locked out?"] Yes they were locked out in 1921 and compelled to accept a wage reduction equivalent to £2 per person per week, and since then they have scarcely been able to make a wage large enough to enable them to exist at all.
The Chancellor of the Exchequer of 1922, in introducing his Budget, informed the House that the one need for the nation at that moment was a reduction in Income Tax, and he reduced the Income Tax by 1s. in the £. These mine workers, who were receiving from £2 to 45s. per week, realised that their poverty had been superimposed, and realised at, the same moment that the Chancellor of the Exchequer was making a large present to those who had already more than enough. During 1922, the Chancellor of the Exchequer's prophecy, was in no way fulfilled. He said that, if the Income Tax were reduced, no matter by how much, the benefit would sooner or later filter through to the poorest section of the community; it would express itself, said the right hon. Gentleman the Member for Hillhead (Sir R. Horne), not only in better wages and more industrial prosperity, but also in less unemployment. During this period neither of the three things that the right hon. Gentleman prophesied actually took place.
In 1923 we had another Chancellor of the Exchequer, and he told us exactly the same story, that, if the Income Tax were reduced, sooner or later the advantages would filter through to the poorest section of the community. He also said that unemployment would be affected as a result of the reduction in Income Tax. We also found the present Chancellor of the Exchequer telling us the same story in 1925, and I think we ought to apply any one of the three tests suggested by each of the three Conservative Chancellors of the Exchequer, and see exactly how their prophecies have worked out. I asked the Minister of Labour one day last week what the cost-of-living figures were for 1922 and each subsequent year. We find that the cost-of-living figure, according to the Minister of Labour, in 1923, after the Income Tax had been reduced by 1s. 6d. in the £, stood at 76. In 1924, notwithstanding these reductions in Income Tax, the cost-of-living figure stood at 78. In 1925, when a further
6d. was taken from the Income Tax, and a fairly large present was handed to Super-tax payers, the cost-of-living figure was actually 79; while in 1926 the cost-of-living figure stood at 72. Therefore, from the point of view of the test whether a reduction in Income Tax reflects itself in lower prices and a relatively higher value for the wages of the poorer section of the community, is proved to be absolutely a, failure.
The next test is that a reduction in Income Tax is the best means of providing work for the unemployed, more security, and higher wages. In 1923 we find, according to the Minister of Labour's figures, that 1,284,000 people were out of work. Income Tax was again reduced, and in 1925, following the further reduction in Income Tax, there were still 1,194,000 people unemployed. In 1927, after the third reduction had taken place, there were still on the books of the Employment Exchanges of this country 1,081,000 people registered, and there were 250,000 recipients of Poor Law relief more than in 1924. The majority of those people were receiving Poor Law relief because they were out of work. That indicates that, so far as employment is concerned, reducing direct taxation has had no effect in helping forward industrial prosperity or providing more work for those people who are dependent upon work for wages. Then there is the third test, that a reduction in Income Tax expresses itself in higher wages for working people. Does that prophecy bear the test? We find that, notwithstanding these large reductions in Income Tax over four years, when approximately £130,000,000 or £140,000,000 per annum has been taken from Income Tax and Super-tax, wages are infinitely less to-day in the aggregate than they were in 1922; so that, when the right hon. Gentleman and his colleagues attempt to tell us that reductions—

Mr. CHURCHILL: Is that allowing for the cost of living?

Mr. WILLIAMS: Yes, that is allowing for the cost of living. When the right hon. Gentleman tells us that a reduction of Income Tax immediately reflects itself in increasing the relative value of the wages of workpeople, I suggest, on the basis of the figures of the Minister of Labour, that that statement will not bear
the test. Wages to-day, notwithstanding the reduction in the cost of living, are relatively lower than they were in 1922, and I think the Ministry of Labour Gazette justifies the statement I have just made. If it fails in these tests, there is only one thing that any Government can do that really desires to see the commercial prosperity of this country increase.
I should like to make one observation, and perhaps only one, with regard to the Road Fund. The hon. Gentleman who spoke last complimented the Chancellor of the Exchequer upon expropriating this £12,000,000. One can compliment the Chancellor of the Exchequer on the ingenuity he has displayed in his Budget scheme as a whole, and the readiness with which he applies the principle of expropriation that he is so ready to condemn in other people. I am not suggesting that any other Chancellor of the Exchequer in similar circumstances would not have adopted the same plan—[HON. MEMBERS: "Hear, hear!"]—but I do suggest that very few men would have placed themselves in the same position in which the Chancellor of the Exchequer has placed himself during the past two or three years.
There is another side to the Road Fund expropriation during the past 12 months. We have ample evidence that the Government have restricted moneys that should have been available for schemes where men would have been employed on the making of new roads and the repair of old roads, and, although the Chancellor of the Exchequer suggests that this Fund is brimming over, and expense cannot keep pace with the income, those of us who are moving about the country, who are attached to local authorities, know that local authorities are constantly prevented from coming forward with schemes that ought to be undertaken, where productive work would be provided for unemployed people. If we are going to continue to spend less money per annum than the income of the Road Fund, because of the restrictions placed upon expenditure by various Ministers, obviously there is bound to be a balance, and the Chancellor of the Exchequer can claim that, since it is available, he is justified in taking all of it, no matter how much
there happens to be. I suggest that the unemployment figures ought to be an inspiration to the Chancellor of the Exchequer and everybody else, to allow the local authorities to proceed with this really productive work, providing work for men who desire to work, and who prefer to work for their wages than to receive unemployment pay or Poor Law relief. As long as the Chancellor is going to continue to allow money to be spent on useless expeditions, to be spent uselessly, perhaps, on such schemes as the Singapore. Base, or, as many of us think, on the Chinese expedition, we cannot expect that there is going to be that amount of money available which ought to be available for really productive purposes in this country.
I will conclude with this observation. The Budget scheme as a whole indicates that the Chancellor is capable of emerging from the biggest difficulties, but it also indicates that there is a limit to the ingenuity even of the Chancellor, and unless he and the Government as a whole are going to do something far greater during 1927 than appears to be the case if the Trade Union Bill is a fair guide, then they are not going to have that industrial prosperity, that cooperation and that double effort on the part of employers and employed that we are supposed to require before we can get back to real industrial prosperity. The Chancellor ought to act upon the basis that the more he relieves the already burdened millions of poor, the more is he going to relieve the nation, and the more he can divert from those who have already got more than enough to those who have got less than they require, the sooner will he be rendering a real service to this nation.

Mr. HANNON: I am quite sure that the Committee has been deeply interested in the speech of the hon. Gentleman who has just, sat down, but I sincerely hope that no time will ever arise in this House when the exigencies of national defence will be subordinated to questions of economy or questions of damping down those great services upon which the safety of our nation and Empire depends. The hon. Member who is always popular in this House, and always makes his speeches in the most delightful way, calls the Government to account for sending expeditions abroad, and for
spending money upon the Singapore Base. Surely the hon. Gentleman would not be a party to prejudicing the safety of the lives and property of our people in Shanghai, and, with all his broad understanding about national responsibility, would not be a party to placing our defence operations in the Far East in a position in which they might be totally ineffective in dealing with the serious consequences that might arise from time to time.
10.0 p.m.
I think the Chancellor of the Exchequer ought to be particularly gratified with the reception which his Budget Statement has received in every part of the country, and from every section of the community. I do not think any Budget for a long period of years has been received with such universal satisfaction as that which opened in this House yesterday. All the speeches which we have had from the Opposition have not dealt at all so far with the Budget position, but have been mainly concentrated upon points of policy with which the Budget Statement has very little to do. The right hon. Member for Colne Valley (Mr. Snowden), with all that characteristic acidity which sometimes imposes upon his sublime good nature, made a series of bitter comments on the proposals of the Chancellor, but he did not bring forward a single suggestion as to how he himself would have dealt with the financial exigencies of the current year if he had been on this side of the House instead of on the other side. What is the good of hon. Members on the other side merely making statements of some unfortunate set of circumstances which happened in the past? Why have they not actually dealt with the actual provisions of the Budget Statement as presented by the Chancellor? The whole series of taxes with which he dealt in his Statement Yesterday have almost, in every case been received throughout the country with universal satisfaction. Look at the Press this morning. Those concerned with productive industry, those who really have to bear the burden of paying the taxes, have received the Chancellor's Statement with the most generous, kindly and benevolent consideration. The Chancellor has had an exceedingly difficult task in dealing with the finances of the current year. Hon. Members opposite, in attacking his Statement, seem to
forget the extent to which they themselves, by their unfortunate policy in the Labour party, have contributed to the financial misfortunes of the present year.

An HON. MEMBER: Not a bit of it!

Sir B. PETO: Absolutely entirely!

Mr. HANNON: The right hon. Member for Colne Vailey attacks the Chancellor, and leaves entirely out of account the part which his party played in the unfortunate situation which arose last year, and to the settlement of which they made no contribution of the least constructive kind until the last moment. The right hon. Gentleman ought to be ashamed to make the speech he made in attacking the Chancellor. The right hon. Gentleman, who has had a very wide and extended experience of the Labour movement in this country and this House, has always had the respect of Members on all sides for the work he has done in the creation of a better understanding in the world of labour, knows perfectly well, and every member of the Trade Union Congress knows perfectly well, that if they had not allowed themselves to be deluded into the mad experiment of a General Strike, the financial situation to-day would have been entirely different
I do not want, as one of his loyal supporters, to say anything that will in the least tend to embarrass the Chancellor in carrying this great Measure through this House, but I would impress upon him what has been conveyed to him by many of my hon. Friends on this side of the House, that there is all through the business community of this country to-day a feeling of profound dissatisfaction that sufficient has not been done to reduce the cost of public administration. I know that the difficulties against which the Chancellor of the Exchequer has to contend are very great. It is very easy to make speeches in the country about the value of economy in the public services, but when you come to deal with the actual facts, it is an entirely different proposition. But I would suggest this to my right hon. Friend: Is it not possible for him to appoint a Committee on the lines of the Geddes Committee, again to investigate the possibility of creating economies in the Civil Service? I agree that there must be no interference with the full efficiency of our defence organisation
I do not think that any Minister who is responsible for national defence could interfere either with the Navy, the Air Force or the Army, but I think there is a possibility of doing something, not perhaps very great, to pare down the cost of Civil Service administration. The industry of this country to-day is bearing a burden beyond all comparison with any burdens which have ever been imposed upon industry in the whole of our financial system. One-fifth of the whole of our national income is absorbed in the cost of the Government of the country. The manufacturers of this country, who are engaged in productive industry, are beginning to feel that the time has come when some very substantial reduction must be made in this gigantic charge which the nation is carrying upon its back.
The Chancellor of the Exchequer, with his vivid imagination, with his great quality of constructive political force, and with his inheritance of statesmanship which everybody admires, in the course of the Budget speech surely could do something to make some gesture to the country to show that he is really considering the attitude of the manufacturing industry towards the great burden of taxation which they are bearing on their shoulders. There is to be a somewhat attenuated programme of reducing national expenditure by abolishing certain Ministries. I do not agree that you are going to accomplish very much by the abolition of the Department of Overseas Trade or the Ministry of Transport. Of all the Ministries in His Majesty's Government, the Overseas Trade Department has rendered service invaluable in its quality to the trading community of this country. It has been my fortune to travel through Europe year after year, since the close of the War. My interest in doing so has been to examine, from the point of view of the manufacturing community of this country, the possibilities of extending our trade. I have been in touch, I believe, with practically every commercial secretariat and every Consul and most of the Vice-Consuls in Europe, and I can assure the Committee that the work done by the Department of Overseas Trade in examining the possibilities of, and ill giving sympathetic encouragement to the establishment of fresh lines of communication in trade is bringing the manufacturers in this country in touch with every corner of
Europe. I should regard it, although it may appear to be a sort of heresy in this House when we are preaching economy to say so, as a grave misfortune for the industrial community if the Department of Overseas Trade for the sake of saving the salary of a Minister—I do not think my right hon. Friend has suggested that there will be any further great economy—that this House should be responsible for the abolition of this Department. I venture to suggest that it is a very serious step to take to abolish a Department which has given such valuable evidence of its faculty of doing good to the commercial community in this country since its establishment.
Those of us on this side of the House who believe in a constantly expanding policy of safeguarding industry welcome warmly the announcement of the Chancellor of the Exchequer that he is going to embody the safeguarding of translucent pottery or vitrified pottery, in his forthcoming Finance Bill. On this side of the House we believe in the great expansion of the application of the safeguarding policy and that it will do a great deal to find employment for the people of this country. [Interruption.] Some hon. Gentlemen opposite who have interrupted me have never made one single constructive suggestion as to how one is to put one single man into industry. But the Chancellor of the Exchequer, in embodying the recommendation of the recent Committee of Inquiry in this Finance Bill, and in embodying it in a few days of the Committee having reported, is doing more valuable service towards the employment of the people in this country than all the speeches delivered by hon. Members opposite I ask hon. Members opposite to give us the opportunity of employing our people, of protecting our industry, of safeguarding our labour by the imposition of an Import Duty, and they will be doing more than all the speeches which they make all over the country.
I am very proud that the Chancellor of the Exchequer has also seen his way to include motor tyres in the component parts of motor cars which come under the McKenna Duties. One could never understand—at least, in this particular crisis—why motor tyres were excluded from these duties on imported motor
cars. Thank goodness, the Chancellor of the Exchequer, whose wisdom in public finance will no doubt be applauded for generations to come by everybody concerned in the motor trade, has now seen his way to include motor tyres within the scope of the duty.
My hon Friend the Member for Barnstaple (Sir B. Peto) said it was a great pity that the right hon. Gentleman had not made some differentiation in the Excise and Customs which he imposed on matches. Why in the world, when in this country we have our Bryant and May's and so many other people to make matches, he should have placed matches made by the foreigner in the same position as those made in London by the people who work for Bryant and May's I cannot understand. I can never understand why the Excise and Customs in relation to matches should not be so differentiated as to give a definite preference to those who are doing the work in this country.
I would only like in conclusion to say that we all welcome the projected rearrangement in Income Tax legislation. Of all the embarrassing, exasperating and irritating Acts of Parliament ever passed in this House, the Income Tax Acts are the terror of everyone, and if the Chancellor of the Exchequer can, by appointing an expert Committee, rearrange the legislation relating to Income Tax, so that the Income Tax Acts can, like the Bible, be understanded of the ordinary man in the street, he will be achieving something of profound value to his fellow countrymen for generations to come. We on this side of the House are very proud that a modification is taking place in the Stamp Duties, because in the re-organisation of industry amalgamations are constantly taking place and the reduction of stamp duty will do a great deal to facilitate that valuable work. The whole trend of industrial organisation in these days is for larger combinations. In the process of the development of such combinations the modification the Chancellor suggests in relation to the Stamp Duties will give immense encouragement. I am in full agreement with what has been said with reference to the taxation of co-operative societies. No one would suggest for a moment taxation of the profits of these societies if they stood by the original principle of their organisation
but they are not merely selling goods to their own members. The cooperative society is rapidly becoming a general store. Not merely is it acquiring property which formally paid taxes and will not do so now, but they are actually advertising in the newspapers offering their goods in competition with the retail trader, who has to pay taxes. I do not think that is a fair relationship to exist between the co-operative societies and the retail trader. I hope the right hon. Gentleman's examination of the figure at which he arrived was exact when he said he could only trace the possibility of getting £100,000 out of the profits of co-operative societies if taxation were introduced. I believe the sum is very much larger if he would only take the trouble to examine for himself exactly the amount of profits, after making due allowance for the tax already paid under Schedules A and B.

Mr. CHURCHILL: I have most carefully examined it.

Mr. HANNON: If the Chancellor says so, it is so. We have on this side acquired, after a long period of time and with considerable difficulty, a Chancellor of whom we in the Tory party are particularly proud. I as a loyal colleague would be one of the last to challenge his ipse dixit, but I shall take the opportunity of submitting some figures to him which may modify his point of view.

Captain GARRO-JONES rose.

Mr. HANNON: I am certain the hon. and gallant Gentleman is going to say something of profound wisdom to the Committee, but I am not giving way. We had yesterday a Budget statement which has given intense satisfaction to every section of society in the country. There has not been a single argument adduced from the other side of the House seriously criticising it. The right hon. Gentleman bridged over financial difficulties of the most embarassing character with an ingenuity peculiarly his own. The country ought to be grateful for having an optimistic Chancellor of the Exchequer. Look at the state of the City of London to-day. The City to-day has been more cheerful than it has been for the last three or four years. I wonder if we can put an estimate upon the value to the national investments of the cheerful outlook
in the City to-day. It is a great thing to a country in a time of exasperating difficulty to have a cheerful, bright, hopeful, helpful, inspiring Chancellor of the Exchequer. The country will receive this Budget with generous understanding and with a full feeling of responsibility with regard to the hard work that is necessary to advance our trade and prosperity during the coming year. I look forward, as does the Chancellor of the Exchequer, optimistically to the future, and I think that 12 months hence he will be able to present a Budget in which, without indulging in some of the methods employed in the present Budget, he will he able to prepare a full and wholesome financial arrangement for the next year.

Mr. J. HUDSON: Before proceeding with the case which I desire to present against the Budget, I would like to make a few observations upon the question of the taxation of co-operative profits, referred to by the last speaker and by the hon. Member for Tamworth (Sir E. Iliffe) and the hon. Member for Barnstaple (Sir B. Peto). The hon. Member for Tamworth made it perfectly plain that he no longer considers the question of co-operative dividends as profits. That clears up considerable misapprehension that has existed in the minds of hon. Members opposite, and still exists in the minds of writers in Conservative newspapers who so frequently deal with this matter. There are no profits in the co-operative movement. The co-operative society as an institution is built, as the hon. Member for Tamworth admitted, upon a process of deferred payments—deferred payment of what is paid in by members of co-operative societies in the purchase of their goods. It takes the form of a return of that payment to the members. [An HON. MEMBER: "What about the reserves?"] The reserves that may be paid in a co-operative society, or from one co-operative society to a federation of co-operative societies, or the reserves that may be paid in connection with the work of the Wholesale Co-operative Society, in the long run make their way back to the 5,000,000 members of the co-operative movement, to whom no profits are paid. It may be that many of them receive interest upon the capital that they have invested in the co-operative societies, but the hon.
Member for Tamworth, who, probably, was the most responsible of those who have spoken on the matter—I say this with all due respect to the other hon. Members, because the hon. Member for Tamworth is, I believe, chairman of the Finance Committee of the Associated Chambers of Commerce who are so largely putting this matter forward at the present time—admitted that with regard to interest upon capital the tax would be paid by the persons in the co-operative society who received that, if their incomes were above the usual Income Tax limit. It has been suggested that because Income Tax, as a matter of convenience, is collected from reserves of private firms, that you should adopt the same procedure with the co-operative movement. I would admit that if the co-operative movement was made up of small bodies of shareholders taking profits in the same way as private companies take profits.

Mr. WOMERSLEY: They do.

Mr. HUDSON: It is not so. The hon. Member for Grimsby is still suffering under the misapprehension which the hon. Member for Tamworth has finally disposed of. I insist upon this, that they are not receiving profits at all. They are only receiving a rebate on the price they have paid for a commodity which they buy at the co-operative society stores, they are receiving a trade discount if you will, or an automatic saving by which the members of the co-operative society have learned in the past to build up their own domestic finance and by which the members of the co-operative societies have been able to make these savings which have become ultimately the capital of the co-operative movement.

Sir B. PETO: Will the hon. Member tell the House how the Chancellor of the Exchequer in future is to get his revenue when their policy of abolishing private retail trade altogether is consummated and the whole of the retail trade is done by the co-operative societies?

Mr. HUDSON: If we were dealing with that issue I should be glad to answer the hon. Member. I say this in passing, that when the whole community has become a co-operative community, as we desire it, the Chancellor of the Exchequer will be in the happy position—

Mr. CHURCHILL: I do not think you will choose me then.

Mr. HUDSON: I was speaking in very general terms, because I cannot put myself in the position of adulation which has been adopted by previous speakers. But whoever may be Chancellor of the Exchequer, he will be in the position to take out of these reserves which the co-operative movement has developed, that part of the wealth which is needed for the general national community. [AD HON. MEMBER: "Why not now?"] If we get our opportunity, and the co-operative movement gets its opportunity and is free from the obstacles which the Federation of British Industries tries to throw in its way, and which the Conservative party is trying to throw in its way, we may come to a more satisfactory financial arrangement for the community than the right hon. Gentleman so far has been able to make.
May I turn from this issue, which has been referred to to such an extent to-night by hon. Members opposite, to the Budget proposals. Everybody seems to have been congratulating the right hon. Gentleman, and I suppose I must add my meed of congratulations too. Indeed. I consider that the Conservative party have never had a Chancellor of the Exchequer with such a capacity for inveigling them into accepting what ultimately they will find a very great disadvantage to themselves. He has convinced them by his wonderful ability that he is very desirous of safeguarding the credit of the whole community. He spent a considerable time in referring to the Sinking Fund, and he has shown that his great idea in going beyond the £30,000,000 to £65,000,000 in payment to the Sinking Fund, is to give the impression to the people who have wealth to loan to the community that the financial stability of the country is above all question. Indeed I am sure that the Chancellor of the Exchequer would agree with me that the main and only reason why these regular payments and these increasing payments towards the Sinking Fund should go on, is that those outside who have money to lend may be perfectly satisfied that there has been no mortgage of the country's future and that the country's financial position has been in no sense weakened. [HON. MEMBERS:
"Hear, hear!"] Hon. Members, I notice, agree. Then I submit that the whole of the proposals of the Chancellor of the Exchequer should have been actuated by that motive. Instead of that the right hon. Gentleman has made the Tory party believe that by putting 1½ years' payment under Schedule A of the Income Tax into one year there has been no mortgage of the future. Indeed the right hon. Gentleman has put off the difficulties of the future to the Greek Calends. He is like the little girl in the meadow who blows the fluff in the dandelion head and cries, "This year, next year, some time, never," but the Chancellor of the Exchequer makes sure that "never" is not to be reckoned in the account, because he assumes that the end of the world will come before that. The right hon. Gentleman, however, cannot get away from the point that he has somehow made the future contribute its payment into the present financial year.
I suggest to the right hon. Gentleman that even the expediting of the £5,000,000 payment from the brewers comes under the same head. The brewers have a wonderful capacity for shifting their burdens. There is no better organised monopoly than the brewers' monopoly, and it is not at all unlikely that the 15 months or 14 months of payment on beer taxation, which the Chancellor of the Exchequer is attempting to extract from the brewers this year, will in time be transferred by the brewers to the general community. In exactly the same way the raid on the reserve of the Road Fund should be regarded. The Road Fund is very badly needed, not only from the point of view of the actual construction of roads and the general requirements of commerce, but from the point of view of creating more and more schemes to absorb the enormous number of unemployed in our midst. I observe that hon. Member have been talking about the enormous sum of money in the Road Fund, as if the £24,000,000 was so large an amount that there was enough and to spare when all the needs of the roads have been met. Take one authority like the West Riding authority. Last year they got from the Road Fund a matter of £1,000,000 and still their needs are not met; and when we add the West Riding county authority to the towns in the West Riding area which also want
considerable grants from this Fund, the House will at once realise that though there is likely to be £24,000,000 in the Road Fund it will not meet the needs of the times through which we are passing.
I therefore submit that the £12,000,000 raid which the Chancellor has made is, in the long run, equivalent to a raid upon the Sinking Fund. The right hon. Gentleman has mortgaged our future needs and to that extent he has lessened the financial credit of the community. I pass from the consideration of that general question to the point regarding the scrapping of the three Departments. Surely the Chancellor of the Exchequer realises that in the matter of transport alone the problems which confront the community to-day are so great as to require detailed attention from some Department if the community is to be helped through the crisis and the slump which we are now experiencing. All over the land the problems of transport are intense. The railway companies are fighting with the omnibus companies, and the municipalities are fighting with both. There are contests between the municipalities and the county councils and the problems to be solved in connection with transport in the next year or two are so enormous that unless there be some special detailed attention paid to the matter, all our transport services are likely to be in chaos. Yet this is the moment which the Government select for scrapping a Department that was specially created to deal with these problems.
There is another equally important problem with which the Ministry of Transport ought to deal. I observe on the benches opposite an hon. and gallant Gentleman who took a distinguished part, especially in Committee, in piloting the Government's Electricity Act through the House of Commons. We have pledged Government credit to the extent of £33,000,000 to develop a great national electricity scheme. The Prime Minister was so proud of that scheme that he put it first in the catalogue of Tory accomplishments which he gave to the Scarborough Conference last year. I heard hon. Members in the Committee on the Electricity Act warn the Government that it was quite likely that in the developments which would ensue from the passing of that Measure, there would
be considerable losses. Indeed, it was suggested by several Conservative Members that this £33,000,000 of credit could become something more than credit and might lead to a considerable charge upon the taxes of the country. Although we have embarked upon this enormous national scheme, on the assumption that it would be supervised by a special Government Department, namely, the Ministry of Transport, this is the moment we select for scrapping that Ministry.
The same arguments apply to the Mines Department. I believe we are spending annually on the Ministry of Mines about £170,000, and of that sum £100,000, at least, is for the purpose of safeguarding safety within the mines, and another £15,000 is indirectly connected with that purpose. I can, therefore, claim that practically two-thirds of our expenditure on the Ministry of Mines is incurred for the purpose of safeguarding the mines and guaranteeing them to a greater extent against the terrible accidents to which they are frequently liable. Yet, after the whole country has been moved to its heart by the story of what took place in South Wales recently, and a month or two after the Prime Minister himself went there to express his sympathy with the victims of that terrible disaster, this is the moment you select for scrapping the Mines Department that had been charged with that special duty.
Further, when it is considered that the Mines Department has now got placed upon it special responsibilities as a result of the Report of the Samuel Commission, which the Government wanted our people to accept, work that must go on to a very considerable extent in the future, although all that remains to be done, this is the moment that the Government select for scrapping that Department. I am perfectly willing to admit that, as far as the head of the Department is concerned, they could afford to save upon his salary, but that is not the reason why hon. Members opposite applaud this proposal. It is because they believe there is going to be a saving considerably beyond what might be effected upon one single Minister's salary. I submit that very much closer consideration ought to be paid by this House to these proposals before the Chancellor of the Exchequer is allowed to get away.
The hon. Member for Moseley (Mr. Hannon) suggested that we, on this side had not paid sufficient regard to the actual tax proposals in the Budget. I propose to deal with one set of those tax proposals, namely, the newly imposed McKenna Duty as far as tyres are concerned, and the tax which is to be imposed upon translucent pottery. The hon. Member for Moseley suggested that we, on this side, showed too little regard for the employment needs of our people when we came to consider proposals of this kind. Let me remind him what is the position regarding the needs of employment in the particular industry to which this tax on translucent pottery is supposed to apply. The whole question of the tax, before the Chancellor suggested it, had been considered by a special Safeguarding Committee, which has given its Report, and when the Committee was dealing with the issues put before it, the counsel who spoke for those who opposed a tax upon these articles threw out this challenge, that if the British manufacturers got their labour for nothing, they would still be unable to compete in bone china with foreign felspar china firms. He added:
If you take the cheapest factory making bone china here, and every individual in it, from the managing director to the youngest operatives, including the commercity travellers, free, gratis, and for nothing, the cost of bone china would still be dearer and in some cases twice as dear as the cost of a similar article in felspar china made in Germany.
The chairman, who afterwards signed the majority report—only two of them signed that report—agreed that on the figures which had been submitted in camera the case was actually as stated by counsel whose words I have just read out. By this proposal to put a tax upon this commodity the Government do nothing at all to—[An HON. MEMBER: "They get revenue."] But the hon. Member for Moseley was not dealing with the issue of revenue. He took this up as a question of providing employment for the workers in the pottery district, and I suggest, upon the evidence I have given, that no case has been made out that such employment will result; and I would remind the House that the representatives of the workers declined to submit evidence to the inquiry, and the Committee made their decision purely upon evidence put
forward by the employers. I claim, therefore, that the hon. Member for Moseley had no case at all when he attacked hon. Members on these benches for their attitude with regard to employment.
In all the proposals before us we find no solution of the big problem of economy confronting the community. We have mortgaged the future, we have prevented work being done which the very life of the community required should be done, and we have failed—or the Chancellor of the Exchequer has failed—to do anything in regard to the Services where opportunities for economy are most widely offered. How is it that hon. Members opposite now forget the plea which they often make that instead of scrapping Services which deal with the civil needs of the community there ought to be an attempt to scrap some of the Services where waste is greatest. I have heard Conservative Members suggest that as a result of the development of the problem of defence the Army, the Air Force and the Navy ought to be combined in one Ministry. If they would propose that they would give those of us who do not think any defence at all is effective in these days an opportunity to put our case before the House, and at the same time there would be an opportunity for a greater saving than anything which the right hon. Gentleman has yet accomplished.
The Government tell us they hope some clay to effect a saving upon armaments, when they have secured an agreement with other countries by which they can cut down expenditure upon the Army, the Navy and the Air Force. They told us that when the Secretary of State for Foreign Affairs returned from Locarno. The joybells were set ringing rather too prematurely at that time. At the present moment the representative of the Government at Geneva, Lord Cecil, after all he has been able to do, is confronted by what practically amounts to a cul de sac; apparently no agreement is possible, and the whole of Europe is condemned to go on not merely without cutting down armaments but facing a highly probable increase of armaments during the next few years. [An HON. MEMBER: "Russia especially!"] We are faced with a problem of armaments in Europe which
gives no right to the right hon. Gentleman to come down to the House and pretend that next year his problems are going to be lighter than this year. The whole situation becomes worse the longer the Government remains in power and, until we can get a Government that will pursue a policy of friendliness, whether acting towards Russia, China or any other nation, we are condemned inevitably to increase our armaments, to bear heavily upon the commercial needs of the community, and finally to bankrupt the nation to which we all belong.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Commander Eyres Monsell.]

Committee report Progress; to sit again To-morrow.

Orders of the Day — FINANCE [SINKING FUND].

Considered in Committee under Standing Order No. 71A.

Resolved,
That, for the purpose of any Act of the present Session to make provision, among other matters, for amending the law relating to the National Debt, it is expedient to authorise, as respects the current financial year, the issue out of the Consolidated Fund in respect of the New Sinking Fund (1923) of the sum of fifteen million pounds in addition to the sum now authorised to be so issued in that respect." (King's Recommendation signified)—[Mr. R. McNeill.]

Resolution to be reported To-morrow.

Orders of the Day — ELECTRICITY (SUPPLY) ACTS.

Resolved,
That the Special Order made by the Electricity Commissioners under the Electricity (Supply) Acts, 1882 to 1926, and confirmed by the Minister of Transport under the Electricity (Supply) Act, 1919, in respect of the rural district of Leigh, in the county palatine of Lancaster, which was presented on the 17th day of March, 1927, be approved."—[Colonel Ashley.]

Mr. KIRKWOOD: I want to know what this means before it goes through.

Mr. DEPUTY-SPEAKER (Captain FitzRoy): I am afraid I have gathered the voices.

Mr. KIRKWOOD: You gathered them very quickly.

Orders of the Day — ESTIMATES COMMITTEE.

Ordered, That Mr. Ernest Evans be discharged and that Mr. Strauss be added to the Committee.—[Colonel Gibbs.]

The remaining Orders were read, and postponed.

Orders of the Day — ADJOURNMENT.

Resolved, "That this House do now adjourn."—[Commander Eyres Monsell.]

Adjourned accordingly at Five Minutes before Eleven o'Clock.